Nexus: Employees or Sales in Multiple States
A company can achieve nexus, or taxable presence, in state either by having a physical presence (employees or an office) or by reaching a sales threshold (“economic nexus”). Nexus determination is important because once a taxable presence is created in a state, a company is obligated to collect sales tax on its sales of taxable goods and services to customers in that state. A nexus study and taxability review determine where a company might have state tax exposure and the extent of that exposure. We work with our clients to identify the activities in various states that trigger nexus, the date nexus is established and any liability they may have to correct before being able to move forward with a sales tax compliance strategy.
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If you’re wondering whether your employees or amounts of sales are creating a filing requirement – contact us. Or if you’re wondering how to start getting into compliance with state filings – reach us here. It all starts with a nexus roadmap!
Our Expertise in Nexus Determination and Consulting. Why us?
Precision in Determining Tax Obligations
Nexus can be a web of complexities, but our experience in assessing your tax footprint ensures that you know exactly where you stand. We analyze details of your operations across state lines to identify where your business activities establish nexus. The first benefit we offer is the elimination of guesswork; we provide a clear and detailed nexus roadmap that outlines your tax obligations, preventing unforeseen liabilities and ensuring you are fully compliant with state tax laws.
Customized Compliance Strategy
Every business is unique, and a one-size-fits-all approach does not suffice when it comes to multi-state tax compliance. We craft customized strategies that align with your particular business activities and capacities. By doing so, we present a benefit that not only secures you against state tax exposures but also aligns with your business growth plans, optimizing overall tax efficiency and planning.
Ease of Transition to Compliance
It can be daunting to navigate the transition from recognizing nexus to achieving full compliance. We make this transition smoother by handling the intricacies of registering for sales tax, collecting the correct amount, and consistent, timely filing of returns. Our hands-on assistance during this phase offers a stress-free benefit, allowing you to focus on your core business operations without the added burden of state tax complexities.
Proactive Audit Support
The benefit of preemptive audit preparations cannot be overstated. With our comprehensive audit support and defense, we equip you in the event you face state tax reviews or audits. We help minimize exposure through diligent record accumulation, documentation, and strategic representation – a crucial benefit that can prevent costly penalties and interest accruals.
Expert Guidance on Tax Policy Changes
The state tax landscape is ever-changing, especially in the aftermath of the South Dakota v. Wayfair ruling. As part of our services, we offer ongoing education and guidance on these evolving regulations. This benefit arms you with the knowledge necessary to navigate policy shifts proactively, avoiding compliance mishaps, and leveraging potential opportunities in state tax legislation.
Learn more about areas of state tax compliance that may affect your SaaS company.
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As a Tax Professional for a Fortune 500 company in the SF Bay Area, I’ve worked with Bill Loew’s team for over 10 years in the areas of Audit Defense, Reverse Audits and Tax Research. In addition to their technical expertise, the Miles Team is friendly, professional, and highly motivated to help clients achieve significant tax savings. Bill and the Miles Team continue to be a trusted and valued business partner that assist me in efficiently and effectively manage the growing complexities of multi-state sales/use tax compliance obligations.Tax Director
Sales tax isn’t an area of competency for most CPA’s. In talking with Monika and the Miles Consulting team, you can see their breadth of knowledge and experience in sales tax consulting. They are also quick to respond, are helpful, organized, and great at taking cumbersome compliance work off our plate.Corporate Controller, Technology Company
Our experience with the Miles team is that they engage in detailed research, close reading of the law and a savvy navigation of the gray areas where the law meets the business operations. This is often tricky and you have to be aware of risk mitigation, particularly in the SaaS industry, where things can be a little unclear with respect to sales tax. Tax Director, SaaS Company
25 Frequently Asked Questions About Nexus: Employees or Sales in Multiple States
Nexus is a legal term that determines the level of connection a business must have within a state before being obligated to collect tax on sales within that state. Traditional nexus is often established through physical presence, but recent laws include economic activity as a criterion.
A business’s physical presence, such as maintaining a warehouse, office, or having employees in a state, can create nexus, leading to an obligation to collect and remit sales tax, and possibly comply with income and other state taxes.
Yes, economic activity, such as reaching a sales threshold, can establish economic nexus in many states, regardless of a physical presence, necessitating tax collection and remittance.
Once a business achieves nexus in a state, it is required to register for sales tax, collect it from customers in that state, and remit it to the state government on a regular basis.
The South Dakota v. Wayfair ruling in 2018 allowed states to require businesses without physical presence in the state to collect and remit sales tax if they have significant economic operations, such as sales or transactions, in the state.
Economic nexus thresholds vary by state but typically involve a sales amount (like $100,000) or a number of transactions (such as 200) into the state within a year.
Yes, each state sets its own economic nexus thresholds, which can vary widely, and businesses must track and comply with each state’s specific requirements.
A nexus review should be conducted at least annually or whenever there are significant changes to your business operations, sales channels, or the states’ tax legislation.
A VDA is an agreement with a state tax authority allowing a business to voluntarily come forward to report previous tax obligations in exchange for certain benefits, such as reduced penalties or limited lookback periods.
To determine if your company has met economic thresholds in a state, you’ll need to monitor your sales data, reviewing both the total dollar amount and the number of transactions, comparing them to each state’s specific nexus statutes. Many businesses use automated sales tax software to track these metrics.
It depends on the state’s tax legislation. Some states do require businesses to collect sales tax on services if they have nexus there. However, the taxability of services can vary widely among states.
Yes, having an employee – even a remote one – in another state often establishes a physical presence nexus, potentially creating an obligation to collect sales tax and comply with local tax laws.
Yes, inventory housed in a third-party warehouse, such as those used by Fulfillment by Amazon (FBA), usually creates a physical presence nexus in the state where the warehouse is located.
Participation in FBA can establish nexus for your business in any state where Amazon stores your inventory, which may obligate you to collect and remit sales tax in those states.
Yes, there are numerous sales tax software solutions that automate the tax collection process, track economic thresholds in all states, and help with filing sales tax returns.
Miles Consulting Group helps businesses identify nexus, manage registrations, calculate tax liabilities, file returns, and mitigate audit risks. We provide a tailored approach to ensure full compliance across diverse state tax landscapes.
If you discover uncollected sales tax due to established nexus, consider entering into a Voluntary Disclosure Agreement with the state to limit previous years’ liabilities and reduce or eliminate penalties. Contact a tax professional to guide you through this process and ensure that you come into compliance in the most effective way possible.
Yes, in many states, software subscriptions and digital products can trigger economic nexus. Different states have varying guidelines on digital goods and services, with some requiring tax collection once you exceed economic thresholds.
Keeping track of sales tax law changes across states requires continuous monitoring of each state’s legislative updates. Utilizing tax advisory services and tax compliance software can also greatly assist in staying informed and compliant.
Most states have a lookback period for tax liabilities, usually ranging from three to five years. A VDA can potentially limit this lookback period and waive some penalties.
Market-based sourcing is a method of determining tax liability for service revenue based on the location where the customer receives the benefit of the services, rather than where the service provider is located. This can affect where and how much tax a business is required to pay.
Determining where customers receive the value of services can be complex and often depends on contract specifics, customer location, and the nature of the services provided. It may require in-depth analysis by tax professionals.
Once nexus is established, businesses should register for a sales tax permit, determine the taxability of their goods and/or services, set up tax collection systems, file returns, and ensure ongoing compliance.
To start a nexus review, reach out to Miles Consulting Group through our website or by phone to set up an initial consultation. Our team will work with you to gather the necessary information and begin a comprehensive nexus analysis tailored to your business operations.
