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Areas of SALT Where National Uniformity Is Desirable

Since our country is a federation of independent states, that means we have 50 different state-level taxing statutes, regulations, rules, and policies. Even when several state tax laws are substantially similar, there are always nuances that must be considered in complying with each one's tax laws. It can be a bit chaotic. This blog addresses several areas of state taxation where uniformity is desirable.

Jul 1, 2024, 04:08 AM

Jonathan LissBy Jonathan Liss


Under the 10th Amendment of the U.S. Constitution, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” With the adoption of the 14th Amendment more than 100 years after the 10th Amendment, it may not have been contemplated how it would restrain or cripple the taxing power of the states. So here we are, 50 states with 50 different taxing statutes, regulations, rules, and policies. Even in those instances where state tax laws are substantially similar, there are always nuances that must be considered in complying with state tax laws. This blog addresses several areas of state taxation where, in my opinion, uniformity is desirable.

The Taxation of Nonresident Employee Income and Employer Withholding on that Income

U.S. map with each state represented by its flagThis is an issue that has been around for quite some time. Many employees travel outside their resident state for business purposes. A business trip could be as short as one day or, in some cases, an extended period of time. Complicating the issue is the recent and widespread shift to fully remote or hybrid work models. Many states subject a nonresident employee to withholding on the first day of travel within the state. Other states require withholding after the employee reaches a specific threshold (i.e., 30 days within the state). If the threshold is met, an employee must file a state income tax return and claim a credit against its resident state income tax liability for taxes paid to the other state(s). It is a confusing patchwork of rules for both employers and employees.

Federal legislation has been introduced in nearly every Congress since 2011 that, if enacted, would impose a national 30-day withholding standard. The issue has always received broad, bipartisan support in Congress, passing the House several times on a voice vote. A few states have also recently enacted legislation imposing 30-day thresholds.1

Uniformity is unquestionably needed in this area, especially considering the new era of remote work.

The Definition of “Market” for Market-Based Sourcing

Interestingly, market-based sourcing was initially thought to be less complicated than the traditional cost-of-performance method of sourcing sales of services. In practice, though, market-based sourcing rules are often very difficult to apply.

In general, market-based sourcing looks to the location of the service provider’s customers (i.e., the market). However, the states have adopted various approaches to define the market for a taxpayer’s services. Depending on each state’s individual rules, sales of services may be sourced to the location where the service is delivered, where the customer receives the benefit of the service, or the customer’s ordering or billing address. For multistate taxpayers, it is extremely challenging to comply with the different sourcing rules.

The Multistate Tax Commission (MTC), an intergovernmental agency whose mission is to “promote uniform and consistent tax policy and administration among the states”2 has developed model regulations for market-based sourcing of sales of services. As a general rule, MTC Reg. IV. 17.(d) provides that “receipts from a sale of a service are in [state] if, and to the extent, that the service is delivered to a location in [state].” The regulation further provides rules to determine the location of a delivery of a service in the context of several specific types of service transactions.

Although a number of states have substantially adopted the MTC model rules, a lack of uniformity persists among the states in defining the market. Properly attributing sales of service income to states is more important than ever because the sales factor is essentially driving the liability in a given state.3 Establishing a uniform definition of market, aligned with the MTC model regulation, would be an excellent start to achieving consistent market-based sourcing rules for state income tax apportionment.

Period for Protesting an Assessment

The final area I will address relates to the appeal of a state tax assessment. In general, the first step in the state tax appeals process is a state department of revenue’s issuance of a formal notice of assessment. A taxpayer has the right to protest the assessment within a specified period of time (i.e., the protest period). The American Bar Association’s (ABA) Model State Administrative Tax Tribunal Act recommends a 90-day protest period. Any protest period shorter than 90 days is unreasonable and could jeopardize a taxpayer’s ability to fully respond to a proposed assessment. A notice period of 90 days or longer is of increasing importance in a global economy where taxpayers must comply with the laws of numerous jurisdictions.4

Numerous states allow 60 days or less to protest final assessments. In some states, taxpayers only have 30 days to file a protest – Colorado, Maryland, and Tennessee, for example. There are many audit examinations where multiple issues with a high level of complexity are in dispute, and taxpayers will need significant time to prepare a complete and accurate protest letter.

This seems to be relatively easy fix. All states should grant a 90-day protest period, consistent with the ABA’s Model State Administrative Tribunal Act.

Of course, I’ve just barely scratched the surface with this blog, but you can see how there are certain areas of state taxation that lend themselves to uniformity. We should strive to make life simpler and fairer for taxpayers, practitioners, and taxing authorities.

1 Mobile Workforce Coalition
2 Multistate Tax Commission
3 Bridget McCann, CPA, “A Pragmatic Approach to Sourcing Sales of Services,” The Tax Advisor (June 1, 2017).
4 Scorecard on State Tax Appeals and Procedural Requirements, Council on State Taxation (December 2023).


Jonathan Liss is an adjunct professor at Drexel University in Philadelphia and Villanova University School of Law in Villanova, Pa. He can be reached at jal436@drexel.edu.


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Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of the PICPA's officers or members. The information contained herein does not constitute accounting, legal, or professional advice. For actionable advice, you must engage or consult with a qualified professional.



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Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.

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