H. Edward Gallatin
Does Your State Have a Throwback or Throwout Rule?
Does your state have a throwback or a throwout rule? Throwback and throwout rules are designed to allow states from which sales originate to tax the income from those sales in cases when the destination state, which would normally do so, lacks jurisdiction to levy tax on a given company (most commonly due to threshold requirements imposed by federal law), producing this “nowhere income.”
Janelle Cammenga with Tax Foundation states these rules may not be widely understood, but they have a notable impact on business location and investment decisions, and reduce economic efficiency for the states which impose such rules.
Twenty-two states and the District of Columbia impose throwback rules for sales of tangible personal property. Although throwback rules are more common, three states adopt what are known as throwout rules.
Click here to read more on this article on Tax Foundation.