Blog Tax News 10 Nexus Creating Activities For Sales Tax

10 Nexus Creating Activities For Sales Tax

Nexus is the connection or the tie to the state via one of the activities. Activities triggering nexus vary by state.

 

10 Nexus Creating Activities for Sales & Use Tax

  1. Ownership of real property
  2. Ownership of personal property
  3. Leasing of real property
  4. Leasing of personal property
  5. Maintaining of an inventory, whether consigned, stored or carried by sales representatives.
  6. Travel of employees into a state to conduct sales, training, deliveries, installations, repairs etc.
  7. Use of independent sales or manufacture’s reps even if they are not exclusive.
  8. Use of sub-contractors for repairs, maintenance, installations, etc.
  9. Allowing employees to telecommute or use a home office.
  10. Advertisement in local media or phone directories.

Here is a list of helpful tips that may help.

Top Ten Nexus Helpful Tips
  1. Do not underestimate nexus – Not knowing about nexus can destroy your company. If a state determines you have nexus there is generally no statute of limitations on how far back they can audit you. In theory they can go back to the date you started to do business in the state, although in reality they usually stay in the 7-10 year range. But 7 to 10 years is still a long time, obviously.  In additional to sales taxes not collected state would assess penalty and interest as well.  In some extreme cases criminal penalties may also apply.
  2. Educate yourself - Learn about nexus and see how it applies to your company’s operations. Stay abreast of nexus changes as well as changes in your business. Call Sales Tax Accountants for free initial nexus assessment.
  3. Do not assume anything – Just because you have not been contacted by a state yet doesn’t mean you are OK.  You may be OK or it may mean that the state just hasn’t found you yet. Some common ways states find you are through audits of your vendors or customers, disgruntled employees reporting you or your competitors turning you in. There are many other way but these are three of the big ones.
  4. Do not assume that your current CPA’s fully understand nexus – CPAs are generally knowledgeable about the state they are practicing in. We can phone calls from CPAs every week that do not a clue about sales taxes outside there jurisdiction.
  5. If you have nexus do not wait for states to find you –The longer you wait the greater your liabilities grow as there is no statute of limitations. The second reason is that there is a program called a Voluntary Disclosure Agreement (VDA) that states offer to entice you to come forward. The VDA program usually limits the period a state will look back to 3-4 years as well as waiving penalties and interest. If the state finds you before you come forward, then you are usually not eligible to participate in the program.
  6. Do not answer a nexus questionnaire without fully understanding your exposure – When a state becomes aware of you they will usually send out a questionnaire about your activities in the state. Before you answer the questionnaire you should not only understand what your exposure is but what options are available. Once you return that questionnaire, your options may be limited.
  7. Do not just get registered if you find out you have nexus – This may seem counter intuitive, but remember that there is no statute of limitations if you have not filed the monthly returns. Once you come forward and get registered, you’ve lost the one small advantage and leverage you had. The state now knows who you are and the state can go back and audit you for all the past periods. Call Sales Tax Accountants to get a free initial guidance on how to proceed forward.
  8. Do not panic – If you think you might have nexus or have been contacted by a state do not panic. There are programs you can take advantage of and we can help. Just remember not to ignore this issue. It does not go away and it may get worse over time.
Thanks to Sales Tax Accountants our company was able to avoid an expensive audit and save tens of thousands
James Turner - Retail Supply Services

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