Tasty Burgers, Inc. (Tasty) owns marketing intangibles, including trademarks and trade names, associated with the rapidly growing Tasty Burger restaurant chain. Tasty licenses the intangibles to its parent company, Burgers R Us, Inc. (Burgers). Burgers owns and operates Tasty Burger restaurants throughout the U.S., including South Carolina, and uses the intangibles in advertising, signage and menus at all of its restaurant locations. Burgers pays Tasty a royalty for the use of the intangibles based on a percentage of its sales. For the taxable year, Tasty's revenues from Burgers' SC operations were $300,000.

Assume that SC has enacted a tax imposition provision that, among other things, states that any taxpayer with sales in South Carolina exceeding $250,000 for a taxable year is subject to a net income tax imposed by South Carolina.

In light of South Carolina's imposition provision, is it likely that a court in SC would uphold the imposition of a net income tax on Tasty?

A. Yes. Under the Geoffrey decision issued by the SC Supreme Court, Tasty's intangibles in South Carolina create a substantial nexus under the Commerce Clause for the imposition of a net income tax. The tax imposition provision is consistent with that conclusion.

B. No. Under the Geoffrey decision, a substantial nexus under the Commerce Clause requires a physical presence for the imposition of a net income tax.

C. No. Under the Wayfair decision, a substantial nexus under the Due Process Clause requires a physical presence for the imposition of a net income tax.

D. No. Tasty's licensing activities are protected under P.L. 86-272.

Answer rating: 100% (QA)

The most likely answer is C No Under the Wayfair decision a su... View the full answer