Final answer:
No, a physical address is not necessary for a company to owe taxes in a state. Tax liabilities can be based on factors like sales volume or economic activity within the state.
Step-by-step explanation:
No, the statement is false. A company does not necessarily need to have a physical address in a state to owe taxes there. Taxation is based on a company's nexus or presence in a particular state, which can be determined by factors like sales volume, employees, or property ownership. For example, if a company conducts business or generates income in a state, it may be required to pay taxes in that state, regardless of whether it has a physical address there.
Additionally, technology and e-commerce have made it possible for companies to operate without a physical presence in a state while still owing taxes. The concept of economic nexus has emerged, which considers the economic activity of a company within a state, such as online sales or advertising revenue. This means that even if a company does not have a physical address in a state, it may still have tax obligations based on its economic activity within that state.
Therefore, a physical address is not the sole determinant of tax liability in a state. Companies should consult with tax professionals or refer to specific state tax laws to understand their tax obligations in different states.