Nexus 101: Does Your Business Have Nexus?

Nexus isn’t a trend or fad; it’s the scope your business has with regard to sales tax compliance.

While there are many nuances to consider about nexus, including how to classify local deposits in QuickBooks Online, most businesses really just want to know the basics to ensure they file and pay sales tax on time, efficiently, and without any issues. Certum Solutions can help you with any questions you have on nexus and other areas of tax compliance.

According to Avalara, Certum Solutions’ sales and use tax partner that integrates with QuickBooks, there are more than 13,000 U.S. sales and use tax jurisdictions. Each one of these will have multiple tax rates that also may change depending on the economic circumstance of that jurisdiction—think about an increase in local sales tax to pay improve local roads. As a result, any product or service business that charges sales tax may not be aware of their tax obligations, especially if they sell online.

Failure to submit your sales tax reports and payments can be costly! To help you guide your clients, here are some basics for consideration.

Determine if Your Business has Nexus. This is the most important consideration. The court case South Dakota vs. Wayfair forever changed the way nexus is determined. It was kind of like the wild, wild west … prior to 2018, nexus was based on where a business had a physical presence, but with the Wayfair decision, the Supreme Court ruled in favor of a state’s entitlement to sales tax from an out-of-state seller.

As a result, many states updated their definition of nexus to include remote sellers with no physical presence, so nexus now exists based on either a physical or an economic presence in a state. All sellers who have generated enough sales to qualify must pay state sales tax if applicable. You can find out more at this Shopify blog; Shopify is one two Certum Solutions’ e-commerce partners.

Have you Merged With or Acquired Another Business? It’s not unusual for businesses to merge or acquire others, so this is definitely a consideration when it comes to nexus. You’ll need to re-evaluate your situation, so if you are thinking about either of these two any time soon, factor in nexus as part of your decision.

Determine Your Use Tax. According to Avalara, use tax is a self-assessed and declared levy on U.S. consumers and businesses when they buy goods or services from out-of-state providers.  It mirrors sales tax, which are due on purchases by a consumer in their home state, but charged and levied by the retailer. Said another way, use tax is a way of ensuring there are no tax benefits to U.S. consumers from shopping outside their home state, and is aimed at online, catalogue and telephone sales. Certum Solutions can help you determine if you need to pay use tax.

Don’t Ignore the Details. Your business might be creating nexus without knowing it if you do any of the following:

• Participate in tradeshows: Your business may be based in North Carolina, but if you’re exhibiting and selling products at the Fancy Food Show, you could have nexus.

• Conduct online marketing or advertising in a different state: Unless you prefer to stay local, you are probably marketing your business in another state.

• Changes to sales territory, distribution strategy, new warehouse usage, or new marketing strategies.

You’re Not Alone!

We hope all the talk about penalties and fines hasn’t prevented you from finding out as much as you can about nexus. Although there are many details to consider, you’re not alone. Certum Solutions is here to help you sort this out, so contact us today to ensure your sales tax compliance.