When you have a business presence in another state, you must charge and remit sales taxes in that state. This is referred to as ‘nexus’. Nexus impacts businesses that sell products and some services directly to the consumer. It’s a big deal because if you’re company does not remit sales taxes in the state in which you have nexus, there can be significant fines (which vary from state to state).
If a company is a direct seller and has employees or facilities within the state, they are considered to have nexus in that state and they are required to charge and submit sales taxes to that state. However, if you are selling to another business who in turns sales to the consumer, you do not need to charge and remit the sales tax. It is only for sales directly to the consumer. Those rules have not changed.
Where nexus can get tricky
With the South Dakota v. Wayfair Supreme Court case ruling, the Supreme Court ruled that companies could have economic nexus even if they do not have a physical presence in that state. Each state has a separate set of rules for economic nexus and some states do not have any economic nexus yet. If you do not properly charge and remit those sales taxes based on the new economic nexus rules, you could be subject to significant fines.
Below is a listing of all states that have economic nexus and the main rules related to whether or not the company needs to charge and submit sales tax in that state:
Download Table: Click HERE
Nexus can be complicated to determine and can vary from state to state. Have questions about how nexus impacts your business? We can help. Contact us to schedule a call.
After graduating with an accounting degree in 2006, Adam was immediately hired as a staff auditor. He joined LSL in 2013 as an audit manager to oversee a variety of audit engagements and to train staff. Among private companies, he has particular experience with auto dealerships, manufacturing and construction. In addition, he has experience working with entertainment venues including convention centers, stadiums, arenas and theaters. He performs 401(k) audits for larger companies as well as reviews, compilations and audits of financial statements. He will also consult on best practices and controls for specific areas of a client’s business or organization.
You can reach Adam at 714-672-0022.
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