New Jersey Tax Court Publishes Decisions That Dual Nexus Standards Are Inappropriate For Throwout

On January 6, 2016, the New Jersey Tax Court approved its January 14, 2014 decision in Lorillard Licensing Company LLC v. Director, Division of Taxation for publication, making the Tax Court decision precedential. The Appellate Division opinion also has been approved for publication in the N.J. Tax Court Reports. The Appellate Division affirmed the Tax Court in its December 4, 2015 decision that the State may not apply dual nexus standards for Throwout purposes.

In 2011, the New Jersey Supreme Court interpreted the Throwout rule narrowly to find it Constitutional on its face in Whirlpool Properties, Inc. v. Director, Division of Taxation. In so doing, it held that Throwout does not apply when another state may Constitutionally impose a tax on the taxpayer—regardless of the tax decisions by the other state. The Appellate Division applied Whirlpool Properties and held that, because New Jersey successfully asserted an economic nexus standard for Corporation Business Tax Constitutional subjectivity purposes, in applying Throwout that same standard must also apply for other states’ subjectivity.

The companies in both Whirlpool Properties and Lorillard Licensing were represented by Morrison & Foerster LLP.