Could Your Small Business Owe Taxes in MULTIPLE States?

As our nation's economy is prone to fluctuating circumstances, some of the burden during slower times is passed on to state governments and their budgets ... and eventually to your business! And in an effort to stay afloat, they've become more stern on sales tax collections through what they call nexus.

What is Nexus? And Should I Fear It?

Nexus is the relationship between your business and the state. In regards to your taxes, you owe the state sales tax if you're selling taxable items and have nexus within your state. So why should you be concerned, you ask? When you hire or outsource a position to a different state, you could owe that state sales tax, too.

The beauty of technological advancements and economic globalization is the fact that we no longer have to rely on local talent to staff our businesses — anyone who is willing to work is fair game. But unfortunately for our pockets, the extension of our business across borders includes an extension of our nexus.

Is This Procedure New?

As states scramble to keep their budgets balanced due to cuts made at the federal level, they look to the people to make up for lost income. As you may already know, not all services are taxed equally in every state. Plus, some states go beyond state taxes and even collect revenue by municipalities, counties and other regions.

Can't I Just Say That All My Employees are In-State?

You can try, but state governments are pretty serious when it comes to keeping their budget balanced. Often times, business owners, just like you, receive simple surveys that ask about your company, employees and location. And although it may look like a basic, non-threatening survey, it could very well be the state asking you to admit nexus. Our advice: don't let an employee fill these out as it could cost you more than you intended.

We suggest hiring a sales tax professional (see Beaton Accounting) to help you explain your small business tax liabilities and to find out what your business's true nexus is. States are quite focused on auditing and scrutinizing their businesses, so be sure to stay on top of this issue.

Have questions about your nexus or other sales tax issues? We can help!

Call TODAY for a FREE consultation! (631) 921-6894