Knowing where and when you’ve established a sale tax nexus can be a real brain teaser. Need some peace of mind? Enroll in our SalesNexusSolver™ program today!
Sales tax nexus refers to the connection between a business (seller) and a state, where the seller is required to register with the state, as well as collect and remit sales tax in the state. Various business activities can trigger a sales tax nexus, including:
Physcial Presence
Do you have a brick-and-mortar location, office, warehouse, or inventory stored in a state? You have established a nexus with that state, even if you are only renting that physical space.
Sales Activity
The South Dakota v. Wayfair ruling allows states to collect sales tax if you reach a certain sales or transaction volume (economic nexus). Currently, 46 states enforce this type of nexus.
Personnel
Do you have independent contractors or remote employees in other states? You may have triggered a sales tax nexus. Even business travel to a state could establish a nexus.
Affiliate Connections
If you have a relationship with an out-of-state retailer that is conducting business on your behalf, you could potentially establish a sales tax nexus in that state.
Referral Relationships
Paying someone to send your company referrals or sales? If they are in another state, it’s likely that you have created a click-through nexus and will need to pay sales tax to that state.
Online Marketplace
If you operate an online marketplace and provide an ecommerce infrastructure, customer service, payment processing, and marketing, you could be required to collect & remit sales tax.
Each state has its own definition and requirements for what constitutes a nexus, which makes it very complicated for those who do business online or across state borders. In addition, how and when to file varies across the states, and a sales tax bond may even be required. To ensure you remain compliant and file on time, be sure to work with a sales tax nexus expert, like the tax professionals at Tax Defense Network.
SalesNexusSolver™
We know that most small business owners want to do the right thing, but many just don’t know where to start. It can be confusing and complicated, especially for online sellers. Our SalesNexusSolver™ program is perfect for small business owners who are unfamiliar with what creates a nexus, as well as those who do not have the time to stay up-to-date on legislative changes. Through this affordable program, we’ll work with you to determine your responsibilities and help you establish a sales tax nexus compliance process.
Program services include:
Comprehensive Business Review
Sales Tax Nexus Responsibility Analysis
State-By-State Compliance Requirement Summary
With the help of Tax Defense Network, you’ll stay compliant and reduce the risk of an unpleasant tax audit. To learn more about our program and fees, contact us today for a free consultation.
Tax Defense Network
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Sales Tax Nexus FAQs
What is the South Dakota v. Wayfair ruling?
In 2018, the U.S. Supreme Court ruled that states can apply sales tax rules on an out-of-state business even if the business does not have a physical presence in the state. The South Dakota v. Wayfair ruling ultimately opened the flood gates, allowing states to collect sales tax for companies that establish either an economic or physical nexus. Each state has the power to define and determine what constitutes an economic nexus in their state.
Does every state collect sales tax?
No. At this time, 45 states and Washington, D.C. have sales tax. The five states that do not collect sales tax include Alaska, Delaware, Montana, New Hampshire, and Oregon.
Once I determine that I have a sales tax nexus in a state, what are my next steps?
If you are responsible for collecting and remitting sales tax in a particular state, you will need to take the following steps to ensure you stay compliant:
Register for a sales tax permit in that state
Collect sales tax at the appropriate rate from any customers within that state
Determine when and where you must file the sales tax returns for that state
If you need help with any of these steps, don’t hesitate to contact Tax Defense Network. We offer affordable rates to help you with sales tax compliance and filing.
Should I collect sales tax if I haven’t established a nexus?
No. It is illegal for you to collect sales tax from a customer if you have not registered or established a nexus in their state. It is the customer’s responsibility to remit any sales tax due on purchases made from your company. In some states, however, there are notice and reporting requirements for businesses that are not required to collect or remit sales tax. For these states, you will need to include a disclaimer/statement on your customer’s invoice. It should explain that you did not collect sales tax and that the customer will owe use tax. At the end of the year, you’ll also be required to send a statement to each customer in the state and remind them of taxes owed. This is in addition to the list of customers (and their purchase totals) that must be sent to the state.
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