Nexus is the minimum connection or physical presence in a taxing jurisdiction that gives rise to a tax payment or tax collection duty. Businesses are not required to collect sales or use taxes on behalf of a state unless they have nexus in that state. Doing business in a state can create a connection (nexus) to that state. A business can unknowingly create nexus by having physical property (such as inventory or samples) in a state, an employee (such as a traveling sales person) in the state, or having agents in the state operating on the company’s behalf (such as repairmen of sales agents.) Any of these activities can create nexus while the business’s main operations take place in another state.
If you have nexus with a state and don’t know it, you’ll probably never file a sales and use tax return in that state. Filing a sales and use tax return is generally the only way to start the statute of limitations running in a state. The statute of limitations is the period of time in which a state’s tax department can come back to you or your business and issue a tax assessment against you.
We will review your multistate operation in order to determine if you have nexus in various jurisdictions, where you are not currently filing sales and use tax returns. By proactively indentifying these potential trouble spots it allows the business time to either end the nexus causing activity or to begin collecting the applicable sales and use taxes from your customers.