Nexus Studies

What is Nexus?

A company has nexus if it maintains a presence in a state and is subjected to state sales taxes for all sales made within that state. Each state defines nexus differently, making it a complex issue for companies operating in a multi-state environment. What constitutes sales tax nexus? States characterize “presence” for purposes of sales tax nexus analysis via the types of business activities employed by the company, such as drop shipments, fulfillment centers, trade shows, and even traveling salespeople. Companies continually expanding their footprint organically, or through mergers or acquisitions, need to be proactive when it comes to nexus before costly state audits impact your bottom line. To avoid the risk, nexus studies provide the ultimate nexus scorecard.

Nexus Study

A Nexus Study is designed to identify where the company is engaged in business activities that qualify as nexus, and to determine the tax-filing requirements as prescribed by each state. For your TaxMatrix sales tax nexus study, TaxMatrix will review all relevant records, scope all instances that might trigger nexus and create a deliverable by which a state registration, voluntary disclosure agreement and/or amnesty program may be applicable.

The Nexus Study begins with the Nexus Survey, a detailed questionnaire to determine nexus issues.

 

Upon the completion of the Nexus Survey, TaxMatrix will analyze the data, and may need a follow-up with company personnel to clarify certain issues. TaxMatrix will then devise a memo detailing states where the company has potential sales tax nexus exposure. States will be ranked based upon priority level in the memo (deliverable) and will detail why nexus has to be established. A post-Nexus Study discussion will determine next steps.

If you believe a Nexus Study is needed as part of your tax compliance process, please contact us for a free consultation and proposal.