The New Jersey Tax Court ruled that the Division of Taxation may not apply dual nexus standards for Throwout purposes. In 2011, the New Jersey Supreme Court narrowed the Throwout rule 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 Tax Court 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.

Please contact Craig Fields or Mitchell Newmark with questions regarding the decision. For a copy of the Lorillard Licensing Company LLC v. Director, Division of Taxation order, click here. The companies in both Whirlpool Properties’ and Lorillard Licensing’s cases were represented by Morrison & Foerster LLP.