Avalara has just published a handy guide to determining whether your company might be subject to collecting state sales tax – commonly referred to as having Nexus in a particular state.
This 13-page guide covers the following topics:
– What is nexus
– What triggers nexus
– Times are changing
– How to keep up
Among the more noteworthy sections;
Sales tax nexus is the connection between a seller and a state that requires the seller to collect and remit tax on sales made in that state. If you have sales tax nexus in California and Texas, for example, you must register, collect, and remit sales tax in California and Texas. The concept of nexus is fairly easy to understand; the often-challenging part is determining what activities trigger nexus and staying on top of where your business has nexus.
It’s important to note that rules for sales tax nexus may not be the same as rules for income tax nexus. And states are changing their rules regularly so you want to keep on top of each state that you are transacting business to ensure you are complying with sales tax rules.
The most common way that we’ve seen companies come under closer scrutiny is when one of their customers undergoes an audit and the sales tax auditor uses that information to extend an inquiry out-of-state to see if any other companies should be required to charge sales tax.
It is important that you consult with your financial advisor / CPA about what sales tax rules may apply to your company since misapplying the rules could lead to an audit and tax assessment which is typically not easy ( or possible ) to collect from customers after-the-fact.
View the Avalara Know Your Nexus guide here.