Nexus – What is it?
Last Updated on September 5, 2024
Growing your business means taking risks, but failing to pay taxes shouldn’t be one of the risks you take. Unfortunately, it can be incredibly difficult to determine whether you’ll be required to pay taxes or not, depending on the variables of your own state and the location of your clientele. With online businesses booming and states eager to take their portion of sales, every operation needs to assess their fiscal responsibilities. If you’re not sure whether your company will wind up owing more taxes at the end of the year, talk to TaxMatrix today about our convenient Nexus Surveys.
What Is Nexus?
Nexus is proof of a physical presence in a state for the sake of collecting sales and use taxes from a business. If you owe state taxes through Nexus, you will incur fines and interest just as you would in your own state if you failed to pay your tax debt.
Determining Nexus
Each state has its own laws used to define Nexus. Depending on where and how you conduct sales and deliver services, you could be responsible for multiple state tax bills through Nexus. Figuring out your obligations begins with a review of the laws in each state your business activities take place.
Business activities may include:
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If you aren’t familiar with these laws already, hiring a professional to determine how they affect your operations can save time and a significant amount of money.
In many states, the following law is used as a Nexus definition: |
“maintaining, occupying, or using permanently or temporarily, directly or indirectly or through a subsidiary, an office, place of distribution, sales or sample room or place, warehouse or storage place or other place of business; having a representative, agent, salesman, canvasser, or solicitor operating in this state under the authority of the retailer or its subsidiary on a temporary or permanent basis” |
What a state considers “temporary,” however, can vary considerably from one location to the next. It’s important to look at the individual laws in place before assuming you’re free from additional tax.
Fines for Ignoring Nexus
The federal IRS is known for issuing steep penalties if you fail to file your business taxes correctly. Unfortunately, state revenue services operate in the same way. Fines are often double the tax that would have been owed, plus daily interest growth on ignored bills. These debts can add up quickly, they cannot be written off during bankruptcy proceedings, and they have been enough to force many businesses to close.
You Can Avoid Nexus Entirely
At TaxMatrix, we know the laws in each state — and we can effectively teach you how to avoid additional tax bills. Err on the side of caution when growing your sales base in locations with Nexus laws by hiring a professional.
Smart business owners make strategic moves, and stay ahead of your taxes. Let TaxMatrix help you on the road to bigger profits and securing business practices in new areas. Contact us today to learn more about our audit defense services.