Sales Tax Nexus

Income tax nexus is the toughest standard to meet. If you found you had income tax nexus for a state, you undoubtedly have sales tax nexus as well. Unlike income tax nexus, though, which costs you real money, sales tax nexus is more of a hassle. You have to collect sales tax on your sales that are subject to sales tax in the various jurisdictions and then remit it according to that state’s due date schedule.

Here are some other things that can trigger sales tax nexus.

Nexus Based on Temporary In-State Activities

If you or your staff travel for business, even for a short period of time, there could be a problem. Watch out if you attend trade shows or put on seminars. In a recent case, a seminar promoter got hit with a $1 million+ sales tax bill for FREE seminars that he’d given in other states.

When is Sales Tax Nexus Created By Visiting a State

Some states provide more time leeway than others when it comes to temporarily working in that state. For example, many permit you to go into the state for up to 30 days without creating nexus. Other states have a lower threshold, of around 14-16 days. Still other states have no threshold at all. Hawaii and Texas both claim nexus after just a single day within state borders. Texas law provides that if you attend a trade show and do nothing more than offer free information you have established nexus for tax purposes.

Here are just a few more states that have very restrictive in-state activity requirements:

  • California – 16 days in state at trade shows/year will create nexus
  • Texas – 1 day at a trade show = nexus
  • Michigan – 1 day’s work in state = nexus
  • Minnesota – 4 days in state = nexus
  • Massachusetts – simply sending out credit card offers equaled nexus

If you do any type of live promotion, such as speaking engagements, seminars, presentations and the like, make sure you and/or your CPA check out the requirements in the states where you do them.