If you’ve recently learned that businesses now can be required to pay sales tax in states in which their businesses have no physical locations, it’s important to learn about what an economic nexus is and whether your business is deemed an economic nexus. You’ll also discover what sales taxes you may be required to pay on an annual basis if your business is deemed an economic nexus in one or more US states.
How to find out if your business is an economic nexus:
Keep track of your sales in each state:
At the end of the financial year, you’ll need to be able to calculate the amount of sales that your business has made in each individual state as well as the individual number of transactions which your business has made in each state, in a full calendar year. As the rules on what constitutes a sales nexus in each state varies greatly and there is no universal principle in use, to make your job easier.
For example, the sales tax nexus rules in California are more generous than in many states. In the state of California, you’ll only need to register your business as a nexus, if your business generates over $500,000 in sales in a single calendar year. Whereas in many US states, you’ll need to register your business as an economic nexus if your business has earned a much smaller figure of $100,000 per year. Although some states will also require your business to register as an economic nexus for the next calendar year if your business completes more than 200 transactions in a fiscal year.
Speak to a commercial tax lawyer for more detailed information:
One of the best decisions which you can make, if you don’t want to be prosecuted for failing to pay sales tax in states where your business is considered a tax nexus, it’s important to speak to a tax expert, such as a commercial tax lawyer. As commercial tax lawyers are well versed on all of the sales tax nexus laws in each state. As another option, you can also speak to an accountant, who should also have the valuable information that you need in order to ensure that you register as a commercial nexus in all the states where you’ve met the set-out criteria.
Are you required to pay sales tax, the first year that you meet nexus regulations?
No, even if you make the minimum sales required to be defined as a sales tax nexus in a state. If this is the first year that you’ve met this threshold, you won’t be required to register as a sales tax nexus until the following fiscal year. During which time you’ll be required to pay sales tax in this state for the first time.
So if you require information on how to manage qualifying as being a sales tax nexus in one of more states, it’s well worth using the information listed out above to help you navigate your business sales tax obligations.