In recent years, many states have been aggressively taking the stance that out-of-state franchisors have nexus in their state (based on a variety of business factors).
Certain states have even been taking the position that nexus is created when a Franchise Disclosure Document ("FDD") is filed in that state, since the filing of the FDD actually registers the franchise to do business in the state.
Given the complexity of the nexus issue and the ramifications of registering to do business in certain states, franchisors should perform an analysis to determine which states tax returns should be filed in.
Furthermore, franchisors should strongly consider taking advantage of amnesty programs where offered. In addition to the limited availability of these programs, franchisors should be cognizant of the fact that these amnesty programs are only available for short periods of time and often come with specific criteria, such as: that no claim for unpaid taxes has previously been asserted against the taxpayer or the taxpayer has not been notified of an audit for the tax period or periods for which they are applying for amnesty.
- Amnesty programs were available in the following states
Ohio Tax Amnesty Program - Runs from May 1, 2012 through June 15, 2012. During this time, Ohio will waive all penalties and half the interest for eligible taxpayers that file delinquent tax returns and pay the taxes due. The program applies to all tax periods for which the original tax return was due before May 1, 2011. To be eligible for Ohio's general tax amnesty, taxpayers must have owed taxes on May 1, 2011.
Texas' "Fresh Start" Amnesty Program - Runs from June 12, 2012 through August 17, 2012. During this time, Texas will waive all penalties and interest for eligible taxpayers that file delinquent tax reports and pay the taxes due. The program applies to all tax periods for which the original tax return was due before April 1, 2012.
If you have businesses in the states mentioned above, we strongly suggest franchisors contact their tax advisors to determine the appropriate actions to be taken.
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