C Corp Global 2025

C Corp SALT & International 2025

Navigating the "Fiscal Labyrinth": From Post-Wayfair State Nexus traps to the new OBBBA International Tax regime.

Executive Summary

The era of physical presence is over. In 2025, Economic Nexus asserts jurisdiction based solely on sales revenue, exposing C Corps to tax liabilities in states where they have no employees. Simultaneously, P.L. 86-272 protections for digital businesses are eroding as states classify "cookies" as taxable activity.

Internationally, the "One Big Beautiful Bill Act" (OBBBA) has hardened the tax floor. With GILTI rates rising to ~12.6% and BEAT at 10.5%, the cost of global operations has increased, making transfer pricing compliance (Section 482) more critical than ever.

State Nexus

No Office Needed: Sales >$500k in TX, >$1M in NY, or >$711k in CA triggers tax. Digital "cookies" now void protections.

The Advantage

Unlimited SALT Deduction: C Corps bypass the individual SALT cap (now $40k), fully deducting state taxes against federal income.

Global Tax

OBBBA 2026 Shift: GILTI deduction drops, QBAI exemption ends. BEAT rises to 10.5%. Transfer pricing penalties are 20-40%.

The Post-Wayfair Paradigm (State Nexus)

The "Cookie" Trap (P.L. 86-272 Erosion)

States like CA, NY, and MA now claim that placing "cookies" on a user's browser for analytics or offering online chat support constitutes "Business Activity." This voids the federal protection that previously allowed internet sellers to avoid income tax.

Economic Nexus Thresholds (2025)

Crossing these sales lines triggers tax filing obligations, regardless of physical presence:

California
>$711,000
or 25% of Sales
New York
>$1,000,000
Receipts
Texas
>$500,000
Franchise Tax
Washington
>$100,000
B&O Tax

Apportionment & Sourcing

Once nexus is established, how much of your income can they tax?

Single Sales Factor (SSF)

Most states (CA, NY, NJ, TX, IL) now use 100% Sales to apportion income. Property and Payroll are ignored.

  • Impact: Out-of-state sellers pay MORE. In-state manufacturers pay LESS.
  • Market-Based Sourcing: Service revenue is taxed where the customer is located, not where the work is performed.

"Throwback" Rule

If you sell from a Throwback State (e.g., CA, IL) to a state where you are not taxable (e.g., NV), the sales are "thrown back" to the origin state and taxed there.

Strategy: Sometimes creating nexus in a low-tax destination state is beneficial to avoid high-tax throwback.

The SALT Deduction Advantage

C Corp vs. Pass-Through

Deductibility of State Taxes (Section 164)

Winning Strategy
Entity Type SALT Cap (2025) Net Effect
Individual / Pass-Through $40,000 (OBBBA) High state taxes are mostly non-deductible.
C Corporation UNLIMITED Fully deductible as business expense.

International Tax (OBBBA)

GILTI (2026+)

Tax on foreign sub income.

  • • Rate: Rises to ~12.6%.
  • • QBAI: 10% tangible asset exemption REMOVED.

BEAT

Base Erosion Anti-Abuse Tax.

  • • Rate: Increases to 10.5%.
  • • Trigger: >$500M Gross Receipts + 3% base erosion payments.

Transfer Pricing

Sec 482 Compliance.

  • • Penalties: 20% or 40% for mispricing.
  • • Defense: Contemporaneous Documentation is mandatory.

Interactive: State Nexus Monitor

Input your projected annual sales into key states to check for Economic Nexus triggers and potential tax exposure.

Projected Sales by State ($)

Do you use tracking cookies or online chat support? This may void P.L. 86-272.

Nexus Status

California
Threshold: $711,000
Safe
New York
Threshold: $1,000,000
Safe
Texas
Threshold: $500,000
Safe
Washington
Threshold: $100,000
Safe