It’s that time of year again! Ensure sales tax compliance, minimize tax liability, stay ahead of changing laws and stay compliant! Find security in a comprehensive and effective nexus review.
The beginning of the calendar year is a crucial time for businesses to review past sales in order to determine if new economic or physical nexus thresholds have been met or surpassed. Tracking sales is important because most states begin collecting sales tax once a seller meets these thresholds. It’s important to understand your business’ nexus and what to watch for. Let’s review.
Nexus is another word for connection. States nexus with companies to enable them to collect sales tax from their business operations. Sales tax nexus is just the minimum connection a business must have to be liable for sales tax in that state.
In 2018, the landmark South Dakota v. Wayfair, Inc. expanded the definition of nexus to include economic nexus. To sum it up, if you sell enough in a state, there’s a chance you have to register, collect and remit sales and use tax there, regardless of whether or not you have physical operations in the state. Even if your business is based out of one state, economic nexus requires businesses to pay taxes into other states if they meet or exceed that state's economic nexus threshold.
Your business will trigger economic nexus when it passes a certain number of total transactions or exceeds a set amount of revenue in a state. Some states need both transactions and revenue thresholds to be met for it to trigger, other states just need one. These nuances and changes in state legislation are one of the many reasons it’s important to conduct a yearly nexus review.
Physical nexus is anything that gives your business a physical presence in a state.
Qualifying criteria for physical nexus varies by state. Obviously, an office or a retail location will trigger physical nexus. But so can a warehouse, a remote employee or even a contractor. You could even have physical nexus as an FBA (Fulfillment by Amazon) seller if your products are stocked at an Amazon fulfillment center in a state. It all depends on the location.
Here are some examples of potential physical nexus triggers:
If you own a business (whether it’s brick-and-mortar or online), it is vital you know whether you qualify for physical and/or economic nexus. If you are audited by a state and you have unpaid liability, this could be costly. This has the ability to demolish businesses, retirements and personal finances. A yearly nexus review can:
Look, we don’t want to overwhelm you. On the contrary, we are here to help you succeed.
The key to successful sales tax compliance is education. Know the sales tax laws of your state and jurisdiction and know where you have nexus. To begin navigating this arduous process, we have a free resource for you on our website. We have created a state-by-state nexus risk calculator. This will allow you to research state-by-state and provide you with the rules around economic and physical nexus. You can utilize this, along with our live chat where you can send any questions you may have about your sales tax responsibility. We also offer a no-strings-attached What’s Next Call, with any further questions or if you’re needing an expert's help to ensure compliance.
As we always say, there’s confidence in collaboration. If sales tax is what is keeping you up at night, let us help you find peace of mind. You are one call away from a good night's sleep.