The #1 topic CPAs are talking about is…. NEXUS! You can bet that if you haven’t been tapped on a shoulder by a state regarding nexus yet, you soon will be. There are thousands, maybe hundreds of thousands of nexus questionnaires out in the mail and planned to be in the mail.
Here’s the quick primer on what you need to know about nexus:
- Nexus means connection. If you have connection with a state, you may have nexus. The only way to know for sure is to investigate what the nexus rules are for that particular state.
- There are three different types of nexus: income tax nexus, sales tax nexus and what we call “not income tax” nexus which includes B & O, Margin Tax, CAT, franchise tax and all the other taxes that states are using to get around their own state laws. Each type of nexus has a different requirement.
- Do you have nexus if you sell in a state? It depends on: that state’s rules, how much you sell and whether you otherwise have nexus (due to physical presence, economic presence, affiliate marketers, or any of the other dozen things that can trip you up)
- If you have sales tax nexus, you are responsible to collect and pay sales tax on any good that is subject to sales tax that is sold to someone who lives in the state. If you don’t collect it, it doesn’t matter. You still owe it.
- States are sending out State Nexus Questionnaires. DO NOT answer these without consulting with an experienced nexus advisor and/or following the tips in “Nexus Strategies for 2011 & Beyond”
- A Nexus Negotiator can possibly help minimize tax, penalties and interest for past years. But don’t talk to the state until you talk to your Negotiator.
States are broke and that means they are looking for more ways to pull you into their system. Nexus is how they’ll do it. Watch out for this one. It’s only just beginning.