Policy letter: nexus; Nov8,1999
Topic Code: N076Nexus Document Reference: 99240163
November 8, 1999
You have requested advice on whether your clients as foreign truck operators may have nexus with Iowa.By foreign truck operators, I assume that you mean your clients are Canadian nationals. If that is the case, then through the operations of the tax treaty between Canada and the United States if your clients are not subject to United States income tax, then your client are not subject to Iowa income tax. The reason for this is that in the case of an individual the starting point to compute Iowa taxable income is “federal adjusted gross income before the net operating loss deduction as properly computed for federal income tax purposes.” While for corporate income tax purposes the starting point to compute Iowa taxable income is “federal taxable income before the net operating loss deduction as properly computed for federal income tax purposes.” In the absence of federal adjusted gross income or federal taxable income, there can not be an Iowa taxable income.Iowa Code section 422.33 states:A tax is imposed annually upon each corporation organized under the laws of this state, and upon each foreign corporation doing business in this state, or deriving income from sources within this state, in an amount computed by applying the following rates of taxation to the net income received by the corporation during the income year:In regards to whether your clients have nexus with Iowa, Department rule 701 IAC 52.1(1)(a) defines doing business as:a. Doing business. The term “doing business” is used in a comprehensive sense and includes all activities or any transactions for the purpose of financial or pecuniary gain or profit. Irrespective of the nature of its activities, every corporation organized for profit and carrying out any of the purposes of its organization shall be deemed to be “doing business.” In determining whether a corporation is doing business, it is immaterial whether its activities actually result in a profit or loss.It is the Department’s position that trucks merely crossing the state in a regular and continuing manner constitutes doing business in Iowa. It is immaterial whether the trucks stop, load or unload cargo, or perform any other activities within the state.If you have any further questions, please contact me at (515) 281-5698 or by mail.For you information, you may find the Iowa Code sections, Department rules and public information library, tax forms on the Department’s web site: www.state.ia.us/tax .Yours truly, John Christensen CPAPolicy SectionCompliance Division