Hot Issues in Determining Multi-State Sales Tax Nexus

Multistate taxes are a major issue and reason for confusion for tax professionals across the US. The reason is pretty easy to understand: they are spread across the States and need to be collected as prescribed, at different rates for different states. If the entire difference lay in only the rate, there would have been a lot lesser scope for misperception. But the situations in which multistate sales tax, known as Nexus, are to be collected vary. This is why there is considerable misunderstanding and ambiguity as regards determining multistate sales tax Nexus.

Nexus here means physical presence. This is the determinant in helping sales tax professionals decide whether a certain position or action requires Nexus. Multistate sales tax Nexus is decided on these following hot issues:

Selling in one’s own state:

When a business that is based in one state sells to customers within that state, that business is deemed to have established a Nexus with the customer. Hence, this kind of sale attracts a tax. The sales tax is to be collected no matter whether the customer collects the item at the seller’s location or has the product transported to a location of her choice.

Selling to customers in other states:

This is the next hot issue in determining a Nexus. This is how this issue works: If a business sells an item to a customer located in another state and the business transports the item to that customer at her location; it is required to charge the customer a sales tax only when it establishes Nexus in that state. In such a situation, the business has to charge that sales tax at the rate prevailing in that state. Conversely, if the customer comes over to the business’ location to take the product, the host state’s sales tax becomes chargeable.

Legal stature of the business:

Another of the hot issues in determining multi-state sales tax Nexus relates to the status of the business. Nexus gets established differently based on whether the business is owned, leased, maintained, occupied or used. And then, the business will also have to consider whether the goods are stored or sold in an office, factory, warehouse or other such entities. Further, other factors such as whether all these are done with the help of an agent or a subsidiary come into the picture.

Status of employees:

Another major source of confusion arises in relation to the status of employees in a business that does business or sells in other states. Some of the hot issues relating to this aspect relate to whether the business is selling through fulltime employees, part-time employees, consultants, independent contractors or other kinds of representatives. Also taken up for consideration is whether the sale has been happening through their affiliates or references. In all, there are quite a few grey areas regarding hot issues in determining multi-state sales tax Nexus. These need expert guidance in being implemented.

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