ID: Single, Non-Customer Facing Employee Created Corporate Income Tax Nexus

The Idaho Tax Commission recently determined that a California-based company that had a single employee working from home in the state had corporate income tax nexus with Idaho. The employee at issue wrote code for the company’s internal systems. At no time did the employee meet with customers, engage in solicitation, or enhance the company’s market for services in Idaho. However, the company had provided the employee with a computer. The Commission noted that the definition of “transacting business” contains two concepts. First, if a corporation owns or leases any property located in Idaho for the purpose of or resulting in economic or pecuniary gain or profit, the corporation is transacting business in Idaho. Second, if the corporation engages in or transacts any activity in Idaho for the purpose of or resulting in economic or pecuniary gain or profit, the corporation is likewise transacting business in Idaho. The Commission concluded that the company was “transacting business” in Idaho under both of these concepts. Although the computer and the Idaho employee's activities were limited to writing code for the company’s internal systems and the Idaho employee did not have personal contact with the company’s California customers, the Idaho statute simply required that the property or activity in the state be for the “purpose of or resulting in economic or pecuniary gain or profit.” In the Commission’s view, the employee and his computer were in Idaho to contribute the company’s overall business activity that would ultimately “result in economic or pecuniary gain or profit.” Please contact Chris Hoge at 801-237-1350 with questions on this decision.