An increasingly complex tax consideration for companies who operate or sell in more than one state or via online involves the question of nexus, the term used to describe when a business has sufficient presence (direct or indirect) within a particular state to subject it to one or more taxes in that state. Many companies take an unnecessary risk by not filing required tax returns for each state in which it has nexus. The resulting penalties can be severe, and are often aggressively pursued, as states chase funds to fill coffers depleted by recent economic events.
But with challenges often come opportunities. The nexus tax rules also allow companies to potentially reduce their state tax burdens by allowing for their tax base to be allocated to states where they have a “presence”, including those states with no tax filing requirements or those with a lower tax burden. With year-round attention and plenty of advance planning, ShindelRock can apply a comprehensive tax planning approach to each of our clients’ activities to legally minimize tax burdens.
When considering your business’ activity and possible nexus issues/opportunities, ShindelRock’s analysis will include:
Nexus (if a business is subject to a tax in a particular state):
- Is there a physical or economic presence, and in what states?
Applicable taxes including:
- State Business Taxes such as: Income Tax, Gross Receipts Tax, Franchise Tax, Commercial Activity Tax, State Sales & Uses Taxes, State Payroll Taxes
Allocation of Taxes to States:
Sourcing of Sales:
- Sourcing rules vary from state to state
- Can vary within a state depending on the type of tax
- Vary depending on the type of sale (retail, service, digital, internet, etc.)
Determination of Which Apportionment Factors Apply (for Business Taxes):
- Sales
- Property & Equipment & Rent
- Payroll
Don’t wait until a state tax auditor calls to address the nexus issues your business may face. ShindelRock’s tax professionals can assist you with nexus determinations and work to minimize your state tax burdens. Contact Maria Montie [1], CPA, MST, CVA, CFFA for more information.