One Small Step (Backward) for Taxpayers, Many Giant Leaps for State Tax Departments

Author: Wayne K. Berkowitz CPA, J.D., LL.M.

Is it just me? Readers, have you noticed? Are state tax departments becoming more aggressive? Is this a brand new trend inspired by my tortured paraphrasing of Neil Armstrong’s famous statement upon exiting the lunar module at 10:56 PM on July 20, 1969 and the very recent release of a new documentary film about the Apollo 11 mission?

I think not. State tax departments have always been aggressive. What is new, in my opinion, is the emboldened stance taken by both tax departments and the state governments, which send the departments on their daily missions.

Wayfair, (sorry for mentioning it) the Supreme Court decision affirming that physical presence is not an absolute necessity to create nexus for sales tax collection purposes, seems to have let the imagination of state legislatures run wild.

I have been told by a current law student, who will remain nameless, that the buzz in her Constitutional Law class was that the Supreme Court has a bag of magic words they can turn to when they wish to achieve a certain result. Both strict interpretation and living document perspectives be damned. Results are the key. Funny, we said almost the same thing when I went to Law School.

Legal scholars, if you do read my blog, have probably noted by now that I have yet to offer any proof to back this up. I can tell you with certainty that when I take that first small step out of the train car every morning I know an adventure is in store for both myself and my clients. I must deal with real life questions, with real life consequences regarding where I need to file tax returns —for sales tax, for income tax, and for a host of other state and local taxes.

I beg you, state lawmakers, look before you leap. Just because you can do something, does not mean you should. Are you so sure that temporary uptick in revenue is going to have long-term benefits to your economy?

One last legal cliché, before I close. “Bad facts make bad law.” That is the real motivation behind this blog. The step transaction doctrine, which will throw transactions together in certain cases, has been “thrown” in my face twice last week. In one case by a state tax department and in another case related to some preemptive planning. Nothing new here. Nevertheless, the post-Wayfair tone of the conversations and analysis just feels different to me. Am I the only one to notice?

If you have questions and concerns about this new aggressiveness, contact me at This email address is being protected from spambots. You need JavaScript enabled to view it..">This email address is being protected from spambots. You need JavaScript enabled to view it..

Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.