State and Local Taxes: What Will Happen in 2011?

What do you think are the "hot" state and local tax (SALT) issues in 2011?  What do you think will impact your clients the most? 

Well, to help you get started, here are a few of the topics I see impacting companies this year:

1. Economic nexus standards - currently 42 states say they have economic nexus standards and yet only 5 have adopted "bright-line" standards.  Therefore, the other 37 states have not provided clear guidance on how to apply their economic nexus standards.  Will they adopt "factor-presence" nexus standards or a "bright-line" test? 
2. Will P.L. 86-272 become irrelevant?  As states look more to economic nexus or "bright-line" nexus standards, will they also seek to adopt gross receipts or non-income based taxes so they can apply economic nexus to all companies, not just service providers and sellers of intangibles? 
3. Will all states follow the trend and adopt "market-based" sourcing of service income?  Currently, 13 states utilize "market-based" sourcing or sourcing service income based on where the benefit of the service is derived; generally, the location of the customer.  The other states currently source service income based on where the service is performed.  The combination of "market-based" sourcing and economic nexus may cause service providers to become subject to tax in new states.
4. Amazon.com or "click-thru" nexus - Since January 1, 8 new states have proposed legislation to adopt Amazon.com nexus standards similar to those already adopted by New York, Rhode Island and North Carolina.  Will the legislation pass?  Will other states jump on the bandwagon?
5. E-commerce retailers and remote retailers are under attack either via Amazon.com nexus standards, other nexus presumption standards and the imposition of notification and reporting requirements (similar to Colorado and Oklahoma).  It appears these options are popular tactics to help states close the "use tax" gap.  Will this trend continue?
6. Sales taxation of software, software-as-a-service (SaaS) and Cloud Computing - as the methods in which companies provide and purchase software/services have changed, eventually the sales taxation of software/services will change as well.  The states are currently behind in addressing this change and will soon seek ways to tax it - either by saying the new method is a sale of tangible personal property or by expanding the imposition of their sales tax to services.

Overall, our economy has become predominantly a service economy (whether this is good or bad, is yet to be seen).  We are also moving more and more towards an electronic economy (e-commerce).  The problem is that our current state tax laws were built for a manufacturing economy.  The economic recession's impact on state budgets may just be the "tipping point" which leads or allows states to change their tax laws to more aptly address our economy.  Unfortunately for taxpayers, I think that means more taxes.