Nexus is commonly defined as “a connection or link between two or more things.”  For state and local tax purposes, the term nexus means the minimum connection or link between a state and the business it seeks to impose its tax filing requirements upon. Each state is a separate tax jurisdiction with its own specific definitional standards for determining nexus for out-of-state businesses “doing business” within their borders.  Nexus standards often vary between states and can be different depending upon the type of tax imposed. 

Even though the states impose their own definitional standards, nexus is a Federal issue, governed in the first instance by the U.S. Constitution and construed through legislation passed by Congress and cases adjudicated by the Supreme Court.

Nexus can be one of the most difficult state and local tax issues for a business to grapple with.  This is largely due to constant efforts by state legislatures and taxing authorities to expand its scope in light of dwindling tax revenue largely resulting from the increase in internet sales. 

Many states have adopted economic nexus standards that attempt to assert income/franchise tax filing requirements over businesses with no physical presence in their state.  There has also been a dramatic increase in state efforts to expand nexus for sales and use tax purposes, as states attempt to compel out-of-state sellers to collect tax on remote sales.

Our SALT team has a considerable amount of experience assisting businesses with their nexus concerns.  Based on your activities, we can determine whether your business has filing requirements for different state and local taxes and help you craft a strategy for future tax compliance.

Economic Nexus

Income Tax Many businesses are utilizing current technology to increase sales and market share without having to leave their buildings. Most tax accountants would reason that no new state tax liabilities have been created by these businesses because … [Read More...] about Economic Nexus