Many companies have presence in different states as market and business opportunities expand. In many cases, this these companies create what’s called Nexus. Nexus is when a company has a business presence in a state. This presence can be triggered by three different factors:
- Sales – revenue from product or service.
- Payroll-workforce or sales force in that state.
- Assets-It could be inventory or a fixed asset like a building.
States tax laws vary from jurisdiction to jurisdiction and in many instances what can trigger nexus in one state may not trigger nexus in the next state. Also, it is important to mention that the fact the a business has nexus in state does not mean that business is liable for taxes, it could mean that the company just needs to comply with tax filings in that state. However, in many instances it could also mean that there could be a tax liability. As the rules vary from state to state including the tax rates, many states conform with the apportionment rule. This means that the tax responsibility is limited by the ratio of the specific state (sales/payroll/assets) over total (sales/payroll/assets).
We don’t want to confuse you with too much terminology, calculations or specifics. However we really want to share with you, that if your business does operate in a different state, there could be nexus, and for that our office can help you in maintaining matters in line and make things easier for you.