Question : tax homework helped! different state tax law?
Professor Stephen J. Colbert, DFA, was a professor of film and television production at Hollywood University (HU) in California. His primary role with HU was teaching classes in all the elements of talk-show production. In addition, he also served as a consultant to a number of talk shows based out of the southern California region such as Okra, The Tonight Show with Jay Jello, and Live with Kimmy Jimmel. In large part, his consulting services were valued due to his reputation as a top educator in the talk show production field at HU. Prof. Colbert’s work was considered very high quality and he had been able to generate a substantial amount of profitable consulting work over the last decade. In fact, it was clear that in spite of a full time work load at HU, Prof. Colbert had established a bona fide trade or business with his consulting business. He even had a separate office established in his home to meet with important clients such as Okra herself. He incorporated his business as ColbertNation Inc., in 2006.

In 2009, ColbertNation entered into agreements to provide consulting services to three major clients in 2010 (work will not start until 1/1/2010). The first client is Jay Jello located in Burbank, CA and is expected to generate $ 100,000 of revenue. Jay Jello Enterprises is headquartered in California and all the talk show related activities take place in California.

The second client is Okra, located in Baltimore, MD and is expected to generate $ 150,000 of revenues. Although ColbertNation will be meeting with Okra employees at the Okra Show’s office in Baltimore, the Okra Talk Show is filmed and Okra’s headquarters are in, Chicago, IL.

The third client, The Ben Gleck Show, is located in Boise, ID and is expected to generate revenues of $ 125,000. All of the filming, production and management of the Gleck Show occurs in Idaho.

In order to service these clients properly, ColbertNation intends on hiring 3 employees. They will all work primarily in the ColbertNation offices in Hollywood, CA; however, in order to properly service the Baltimore, MD client, they will be required to fly to Baltimore and spend some time providing consulting and advising their client there. The same will be true of the client in Boise – numerous trips to Idaho will be required. In all three cases, work will be performed in both Hollywood and in the respective clients’ offices. Stephen and the three employees work as a team and so they often travel together but sometimes the length of the stay is different for each employee depending on client needs. Stephen, nor any of the other employees of ColbertNation will set up an office at any client. At most they will spend 3 or 4 days in a client’s conference room while staying at a nearby hotel, then return home. They employees may make this trip as many as 7 or 8 times per engagement.

Stephen has come to you for tax advice because he is concerned that his new out-of-state clients are going to trigger nexus in states other than California. He would like to you address specifically two issues:

1.Will ColbertNation have nexus in states other than California as a result of the engagements described above? Be sure and examine this issue on a state-by-state basis and provide a detailed explanation of why they will or will not per state law.

2.If so, specifically how will ColbertNation need to calculate the apportionment factors related to both sales and payroll (all of ColbertNation’s property is in CA) for all three states. Be sure and examine this issue on a state-by-state basis
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Best answer:

Answer by Meggie Mo
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