What We Learned from the 2022 Bloomberg Industry Group Survey of State Tax Departments

What We Learned from the 2022 Bloomberg Industry Group Survey of State Tax Departments

September 30, 2022

Jeanna Schenk, CPA, MST

More often than not, U.S. states are not in the habit of providing clear guidance on a myriad of tax issues. From what activities trigger nexus to voluntary disclosure agreements, combined reporting, and guidance on how to source receipts for apportionment—taxpayers too often find themselves in need of simplification. For 22 years, Bloomberg Tax has been clarifying important and relevant state tax issues by surveying as many state tax departments as they can. In their annual Survey of State Tax Departments, they send questionnaires to each U.S. state, and include the District of Columbia and New York City.  

The 2022 survey introduction underscores that the state’s answers should not be relied upon as definitive policy statements and that state responses are subject to interpretation. Questionnaires that were not answered this time around were those sent to: Alabama, Arkansas, Colorado, Iowa, Kansas, New York, New York City, and South Carolina. A large majority of the states did participate, providing valuable information for taxpayers. Below we highlight and summarize some of the most relevant and interesting topics addressed. 

Note that, as stated above, the Bloomberg Tax survey should only be used as guidance and is not law.   

Remote workers most often create nexus in the wake of the health crisis 

During the pandemic, remote work was the norm and many states administratively waived nexus for telework during this period. However, most of those periods are long expired in 2022 and taxpayers need to understand where their employees are now located in regards to state tax nexus. 


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A high number of states replied to the Bloomberg survey, stating that telecommuting employees would create nexus for corporate income and sales tax purposes even if such employees were not involved in sales solicitation activities. Most states that responded to the survey said they would impose nexus on a taxpayer based on 1-6 employees teleworking in a state. The only state that affirmatively said 1-6 remote employees would not create nexus was Mississippi. 

Nexus determinations are becoming more aggressive 

The 2018 Supreme Court decision in Wayfair, not to mention the COVID-19 pandemic, have made states more active in expanding their jurisdictions to multistate taxpayers based on economic nexus and the slightest physical presence—for example, remote workers.  

According to the Bloomberg study, states are becoming more aggressive in their nexus determinations. A main discussion point is that states are interpreting PL 86-272 more narrowly. 

PL 86-272 is a law that prohibits states from imposing a net income tax on income derived from interstate commerce if the only business activity within the state is the solicitation of orders of tangible personal property.  

Clear and consistent nexus rules are wanted 

There is a growing need for clear and consistent nexus rules across the states. For example, some states like Texas, California and Massachusetts have “factor-based” nexus rules which provide a bright-line test of a certain amount of sales, payroll, and property in the state. This makes it relatively easy to determine whether an out-of-state taxpayer has nexus within that state. However, most states do not have this standard for income tax purposes.  

Another interesting item in the survey is whether states say a taxpayer has nexus based solely on registration in the state. Sometimes this is the only activity in the state for a taxpayer and the question of nexus comes up a lot in that situation. Based on the survey, 18 states affirmatively responded yes, such as California, Massachusetts and Pennsylvania. Even though the apportionment may end up being 0% and PL 86-272 may be claimed, some of the states have minimum taxes (like Idaho) or net worth/franchise taxes (like Georgia) that still must be reported and filed. Out of those 18 states, about half impose a minimum or franchise tax. 

Sales tax thresholds are more clear and consistent 

For sales tax purposes, all states (that impose a sales tax) have a dollar amount threshold for collection purposes. The Bloomberg study comments on this and says “the tax policy and political implications of broadening the business activity standard are very different than those related to broadening sales and use tax collection requirements.”  

Market-based sourcing methods are most common 

The survey included questions about states’ sourcing method for service revenue. Most states reported that they use a market-based sourcing approach (location of customer/market for the revenue), and only 6 states said they use a cost of performance approach (location of the performance of the services).  

Single-sales apportionment formulas are most popular 

The survey also asked about apportionment formulas. As expected, the single-sales factor apportionment was the most popular—27 states answered this way. Single-sales factor apportionment is popular because many states want to capture more out-of-state business activity rather than focusing on property and payroll located in the state and using 3-factor apportionment formulas. 

Availability of Voluntary Disclosure Agreement (VDA) Programs is widespread 

This 2022 survey was the first time states were asked about availability of their voluntary disclosure programs. Voluntary disclosure agreement programs enable eligible taxpayers who owe back taxes and haven’t filed related returns to avoid penalties by applying to the program anonymously and then paying back those taxes and filing the appropriate returns. Almost all states offer some sort of VDA program to encourage compliance and make it less intimidating for taxpayers to meet it, offering full or partial waivers of penalties—which can also lead to fewer audits.  

One notable item the survey discussed is that most states said that “issues missed on an audit do not qualify for a VDA.” About 23 states also said that receiving a corporate income tax nexus survey would not disqualify a taxpayer from participating in a VDA. All these things should be considered when a taxpayer is determining eligibility for these programs. 

We Welcome Your Questions 

While there were many issues addressed in the 2022 Bloomberg State Tax Survey, the few discussed here only scratch the surface. It can be helpful to focus on answers from specific states as a starting point. Often the guidance provided by states in their laws and regulations are not clear, so getting answers to the questions asked in this survey can be incredibly useful.

Contact Jeanna Schenk, CPA, MST, and the trusted advisors on REDW’s State and Local Tax team for questions regarding any of these topics as you sort through various and complex state laws. We’re here to help you navigate tax laws with expertise and efficiency. 


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