Memo #
20482
New Jersey Supreme Court Affirms Lanco's Holding Imposing State Income Tax Based on "Economic Nexus"
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Communications from the Institute do not constitute, and should not be considered a substitute for, legal advice.
[20482]
October 12, 2006
TO: ADVISER DISTRIBUTOR TAX ISSUES TASK FORCE No. 10-06
TAX MEMBERS No. 37-06
RE: NEW JERSEY SUPREME COURT AFFIRMS LANCO’S HOLDING IMPOSING STATE
INCOME TAX BASED ON “ECONOMIC NEXUS”
The New Jersey Supreme Court held today in Lanco, Inc. v. Director, Division of Taxation1
that New Jersey may constitutionally impose an income tax on a corporation that lacks physical
presence in the state. In adopting the reasoning of the Appellate Court decision it affirmed2, the New
Jersey Supreme Court concluded that the physical presence standard announced by the U.S. Supreme
Court in Quill Corp. v. North Dakota3 is limited to sales and use taxes.
Lisa Robinson
Associate Counsel
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1 N.J. Sup. Ct., No. A-89-05, (October 12, 2006). The Institute submitted a brief to the New Jersey Supreme Court
supporting the taxpayer’s position as amicus curiae. See Institute Memorandum (19276) to Adviser Distributor Tax Issues
Task Force No. 8-05 and Tax Members No. 26-05, dated October 20, 2005.
2 See Institute Memorandum (19125) to Adviser Distributor Tax Issues Task Force No. 7-05 and Tax Members No. 23-05,
dated August 29, 2005 for New Jersey appellate decision; and see Institute Memorandum (17890) to Adviser Distributor
Tax Issues Task Force No. 9-04 and Tax Members No. 38-04, dated August 11, 2004 for the Institute’s brief submitted
amicus curiae in the litigation before the Superior Court of New Jersey, Appellate Division.
3 504 U.S. 298 (1992).