On the other hand, several states have decided that a flash securities transaction does not justify an income tax nexus with the state. For example, an administrative judge (ALJ) for the New York Division of Tax Appeals in Wascana Energy Marketing (USA), Inc., No. 817866 (NY Div. of Tax). App., ALJ 7/18/02), that holding natural gas flash securities within the state would not subject taxpayers to corporation tax because the taxpayer was not active in the state. In addition, the ALJ found that such a tax imposition would have been contrary to the trade clause. The logical examination of a flash security transaction does not suggest that such a transaction would create a link in the name of the seller or buyer, since neither party has a physical presence in the state in which the security passes. However, it is possible to establish a link through the Agency or the contractual relationship with the common air carrier for the purposes of the revenue tax. In the context of an agency relationship, the question arises as to whether the seller had “control” over the item when the title was adopted.
In addition, it does not appear that any of the parties met the requirements for a Nexus on the basis of Tyler Pipe, as neither party established or maintained a transferable contract. A recent ruling by CBP (U.S. Customs and Border Protection) suggests that consideration of the appropriateness of a welfare sale in the case of first-sale export (FSFE) transactions using “flash titles” agreements is being reviewed. In its conclusion, CBP relied heavily on transaction documents and related information to establish that there were no two qualified sales, which denied the use of FSFE for importation. To this end, importers should carefully consider the conditions exposed to securities and losses in order to address the potential challenges of CBP in the use of FSFE. Flash securities trading, a recognized term within the state`s tax system, creates Nexus problems that look like drop shipments. To understand Nexus`s problems with flash securities transactions, you first need to understand what such a transaction is. In a typical flash security transaction, an a-state seller enters into a transaction with a buyer in another country and ships a property into intergovernmental trade through a common third party. Although the common carrier controls the item during shipping, the seller reserves the right. During shipping, the property is transferred from the seller to the buyer in accordance with the terms of the contract. This is usually the case in a state where neither party is related.
A LRD as a distribution company creates the possibility of having a local inventory in the LRD books. However, an LRD becomes the owner – via “flash titles” – for a very short period of time. However, LRDs do not have legal ownership of the inventory during storage or during transport, as the client is still the rightful owner on that date. Therefore, if a main company from non-EU countries is considered to be headquartered in several EU jurisdictions, it sells and sells products on the EU market. The result will not only be a large number of intercompany transactions that will need to be analysed (from a VAT point of view, but also from the point of view of TPs), but also a puzzle of chain transactions that go beyond the EU`s borders.