If you are relatively unaware of all of the stipulations and regulations which surround sales tax nexus that have become commonplace around the country in recent years, you’re in luck. As listed below are a few common questions and answers about sales tax nexus that will help you better understand what they are and how they can affect your business.
Questions and answers about sales tax nexus:
What is a sales tax nexus?
First and foremost if you want to understand the implications of being deemed a sales tax nexus in a state that your business has no physical premises in, it’s important to define the term sales tax nexus. Which is a relatively new term. Simply put a sales tax nexus is an entity such as a business that a state believes has significant economic interest in their state and should be taxed the same way that local businesses are.
Why does sales tax nexus exist?
There are numerous reasons why sales tax nexus exist. One of which is that many states don’t want to give tax cuts to businesses outside of their state as one of their goals is to support local businesses, who pay them taxes on an annual basis and help their state thrive. The second primary reason why sales tax nexus exist is as a money-generating scheme by each state. As states across the country quickly realized that they could multiply their yearly intake of sales taxes if they started to charge out-of-state businesses sales tax.
Is your business a sales tax nexus?
If you’re unsure of whether your business could be a sales tax nexus, which would require you to quickly register your business as such, with the state in question, you’ll need to do some more research. As the definition of a sales tax nexus varies from state to state. So if your online business for example does business in all 50 states across the country, you’ll need to check the individual requirements of all 50 states in the country. To find out how many states your business is deemed a sales tax nexus in.
What are some examples of the requirements for a nexus in key states around the country:
As California is one of the largest states in the country, we’ll start with California. Currently in the state of California if your business earns $500,000 in sales in California in a single year, the very next year your business will be required to register as a nexus with the state of California so that the state will be able to start collecting sales tax from your California transactions.
Are there any other requirements that could cause your business to be deemed a nexus?
Also, keep in mind that if you exceed a certain number of individual transactions in a year you may also be required to pay sales tax in a state. In many states, this figure is 200 transactions.
So if you’re interested in sales tax nexus and are curious about your business’ responsibilities regarding them, make sure to look up the regulations for each state.