Got Nexus?

For tax purposes, nexus is defined as: the minimum connection or link necessary, which allows a state to tax you or force you to collect taxes on its behalf. This minimum link can vary from state to state as well as from tax to tax. Some nexus creating activities are obvious, others less so. Nexus is determined differently for income taxes and for sales tax purposes. For Income Tax Purposes In general, nexus is created for income tax purposes if an entity derives income from sources within the state, owns or leases property in the state, employs personnel in the state in activities that exceed "mere solicitation," or has capital or property in the state. The requirements vary from state to state. For Sales Tax Purposes Nexus is determined for sales tax purposes more loosely. Here are Here are some cases in which a business might have a sales tax nexus in a state: •If the business has a physical location in the state •If there are resident employees working in the state •If the business has property in the state •If there are employees who regularly solicit business in the state. The issues relating to whether a business has a nexus in a state and is thus subject to the state's taxing authority is complex and each state views the concept of nexus differently. A nexus for state sales tax purposes has in the past required a physical presence of the taxing business in that state; most recently nexus has also been invoked in relation to affiliates. It is imperative that a company know its nexus footprint. How Can I Determine if I Have Nexus? The best way to determine if you have nexus is by making a list of all your activities in each state and then reviewing the states guidance for whether or not you have nexus on a tax by tax basis. If this task appears daunting, you may consider organizing your list into manageable groups, such as the top five revenue-producing states, and so on. If you prefer you can outsource the process to State and Local Tax Expert who can help you determine where your company has income or sales tax nexus. We have three programs to help you determine your nexus footprint: nexus consultation, nexus review, and a nexus study.