If you have important questions about the issue of nexus sales tax and don’t know where to start when it comes to figuring out your business’ responsibilities when it comes to paying taxes in states that you don’t have a physical premise in, you’ve come to the right place. As if you continue reading, you’ll learn everything that you could ever want to know about the topic of sales tax and the creation of legal nexuses in order for states to generate revenue.
Everything you want to know about nexus sales tax:
What is a sales nexus:
A nexus is a term that is used to legally define an entity that is located outside of a state but is still legally obligated to pay sales tax in the state in question. Yes, that’s right even if you have a business that has been based in California for the last 10 years, if your business sells products and services online to customers in other states you may need to pay sales taxes in these states. However, do keep in mind that the regulations for what constitutes a sales nexus in each state differ and some states are far stricter than others.
What is an example of strict nexus regulations:
In stricter states like South Dakota outside businesses, including businesses that operate entirely online will need to pay sales tax in the states in question if they complete only 200 individual transactions with customers in a year. Which is an insanely easy number to meet and will catch a lot of out-of-state businesses off-guard. As businesses won’t necessarily bring in a lot of revenue from a state, from just 200 individual transactions. However, there are no exemptions and in such states, you’ll still need to pay sales tax.
Unless you decide that it’s simply far too hassle and that you’ll stop selling your business’ products and services to customers in a specific state such as South Dakota which is also your prerogative. Some businesses decide that they’ll only continue to do business in states that have more lenient nexus laws or that you make hundreds of thousands of dollars each year.
Do I have to figure out my nexus responsibilities on my own?
Thankfully no, the vast majority of businesses use the services of an accountant or lawyer to deal with their sales tax obligations. So if you don’t want to go through the hassle of researching the sales tax regulations of all 50 states, do yourself a favor and get in touch with a qualified accountant or lawyer who’ll be able to help you understand the steps that you’ll need to take in order to fulfill any nexus obligations which you may have.
What to do if you know that your business is successful enough to be deemed a nexus in a particular state:
Once you’re aware that your business is indeed a nexus in a state, the next calendar year you’ll need to register your business as a sales tax nexus with the state in question.
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