One of the main goals for a taxpayer is to increase his revenue. Two of the main areas, for a business to achieve this, are to expand its customer base into various states and to provide customer service. This could mean that the taxpayer might perform various kinds of transactions to expand the business’ influence in a state.
Depending on the kind of transactions, and the situation that the business finds itself in, nexus might be created. Nexus means that a taxpayer has filing obligations with a state whether for purposes of paying sales tax, filing state income tax returns, filing tangible personal property tax returns & other similar filing requirements.
There are many types of situations where a business could find itself having nexus with a state and most of it is concerning whether the taxpayer has economic substance with that state. Economic substance means that a business is essentially using the resources and infrastructure, of a state, to expand their business, for example using the state’s roads, properties, etc.
Certain transactions, that could create economic substance, are holding inventory in a warehouse, hiring employees to work, hiring independent contractors to work in a state, sending an employee to repair items in a state and many others. We always urge taxpayers to consider nexus implications for any new type of transaction which they are not familiar with and to test, on an ongoing basis, whether they have a nexus within the state.
Our firm is here to help you in making these kinds of considerations and would gladly consult with you on possible taxable effects and filing requirements that you might incur from having a nexus within a state.