Sales tax nexus and your business….what do you need to know?

Tax law uses the term ‘nexus’ to describe a business’s presence and its activities in a state and its obligation to pay sales tax for sales made within the state. The nexus determines the degree of business activity a business must have prior to imposing the sales tax. A taxpayer is required to pay, collect, and remit sales tax and pay state income or franchise tax in that particular state. Your business will be subject to sales tax even if your home office is not located there and your tax lawyer will let you know about this.

Uncle Sam has never been this greedy – you cannot hide money like Americans used to be able to do. So even if tax rates were higher at some point in the past, there is less ways to hide money. The cost of doing business in America now is extreme, certainly in some states compared to others.

You qualify for the nexus if your company:

• Is based in a state
• Doing business in the state
• Has resident employees in the state
• Enjoys a customer base in the state
• Has property in the state

Is this blowing up in your face? Are you worried about this? Do not allow this to become a massive detriment to your business. You need a tax lawyer. Go right here: Tax.USAttorneys. Contact us if you have too.

While this may be straightforward, the nexus is more complex since federal and state tax laws come into the picture. Moreover, each state has its own definition of nexus. Recently, the sales tax nexus has been widened to cover affiliates as well. As said before, Uncle Sam has never been this greedy before.

Therefore, if you have a sales office in another state you are eligible to pay sales, income, or franchise tax for all sales that occur in that state. In such a case, you need to register your business as a foreign corporation or entity in the other state and apply for a registration at the state’s business licensing division.

Once you are registered, you are required to report to that state as well and your tax attorneys will help you complete that paperwork as well. Every state must support those who are unwilling to work. Creating jobs in that state is not good enough – it is like you are being punished for creating jobs.

There are a few factors you need to be aware of when you register as a foreign corporation.

• If you are an online retailer, you are required to collect sales tax for all sales within the state.
• You are not required to collect or remit sales tax for shipments made outside your state where you do not have a sales office or representative.
• You need to have a sales tax permit prior to selling taxable goods or services.
• States impose strict penalties for violating sales tax laws.
• Most states have special provisions in their laws on sales tax nexus.
• States have sales tax auditors that may visit your location if they have good reason to believe you have violated any sales tax laws.
• You need to file a sales tax return even if your sales equals zero.

Internet Tax Freedom Act (ITFA)

The Internet Tax Freedom Act (ITFA) of 1998 prohibits any new taxes being collected on Internet access fees by federal, state, and local governments and tax lawyers were studying this law through and through in the later part of the 20^th century. Moreover, most states do not collect this tax much to the happiness of businesses trying to survive in America. However, the act does not stop states from imposing taxes on online transactions. The main objective of the act was to promote the commercial, educational, and informational potential of the Internet.

However, the latest news from consumerist.com is that President Obama has just signed into law a piece of legislation that permanently bans and puts an end to Internet taxes still collected by a few states. Even a broken watch is right twice a day.

Despite this, the bottom line is to be well versed with the various sales tax laws in states that your business operates or is thinking of operating in. The sales tax laws could be complex to handle since every state interprets the laws differently. To deal with your tax issues, you could always turn to a tax lawyer.