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Economic presence meets taxing requirement

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In a matter of first impression, the Indiana Tax Court has ruled that a bank didn't need to have a physical presence in the state to be subject to Indiana's Financial Institutions Tax.

In MBNA America Bank, N.A. & Affiliates v. Indiana Department of State Revenue, No. 49T10-0506-TA-53, MBNA America Bank appealed the Department of State Revenue's denial of its claims for a refund of the Indiana Financial Institutions Tax (FIT) it paid during the 1992-98 tax years. MBNA argued because its principal place of business is in Delaware and it doesn't have a place of business here nor did any of its employees come here on business, it wasn't subject to the FIT.

The bank believed under the Commerce Clause, which prohibits states from charging taxes on an out-of-state business unless it has a "substantial nexus" with the taxing state, a company has to have a physical presence in Indiana in order to be charged the FIT. The department moved for summary judgment on the issue.

Indiana Tax Judge Thomas Fisher determined the U.S. Supreme Court holdings in National Bellas Hess v. Department of Revenue of Illinois, 386 U.S. 753 (1967), and Quill Corp. v. North Dakota, 504 U.S. 298 (1992), don't control in the instant case because the U.S. Supreme Court didn't extend the physical presence requirement beyond sales and use taxes.

Because those cases don't control, it becomes a matter of first impression for the tax court to determine whether an economic presence can satisfy the "substantial nexus" requirement for purposes of the FIT. Judge Fisher relied on a Supreme Court of West Virginia case on the issue, adopted its reasoning in Tax Commissioner of West Virginia v. MBNA American Bank, 640 S.E.2d 226 (W. Va. 2006), and held an economic presence is sufficient to meet the substantial nexus requirement.

Based on the facts in the instant case, MBNA had an economic presence in Indiana and thus had a substantial nexus with Indiana for purposes of the FIT. Judge Fisher granted the department's motion for summary judgment.

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  1. KUDOS to the Indiana Supreme Court for realizing that some bureacracies need to go to the stake. Recall what RWR said: "No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!" NOW ... what next to this rare and inspiring chopping block? Well, the Commission on Gender and Race (but not religion!?!) is way overdue. And some other Board's could be cut with a positive for State and the reputation of the Indiana judiciary.

  2. During a visit where an informant with police wears audio and video, does the video necessary have to show hand to hand transaction of money and narcotics?

  3. I will agree with that as soon as law schools stop lying to prospective students about salaries and employment opportunities in the legal profession. There is no defense to the fraudulent numbers first year salaries they post to mislead people into going to law school.

  4. The sad thing is that no fish were thrown overboard The "greenhorn" who had never fished before those 5 days was interrogated for over 4 hours by 5 officers until his statement was illicited, "I don't want to go to prison....." The truth is that these fish were measured frozen off shore and thawed on shore. The FWC (state) officer did not know fish shrink, so the only reason that these fish could be bigger was a swap. There is no difference between a 19 1/2 fish or 19 3/4 fish, short fish is short fish, the ticket was written. In addition the FWC officer testified at trial, he does not measure fish in accordance with federal law. There was a document prepared by the FWC expert that said yes, fish shrink and if these had been measured correctly they averaged over 20 inches (offshore frozen). This was a smoke and mirror prosecution.

  5. I love this, Dave! Many congrats to you! We've come a long way from studying for the bar together! :)

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