Nexus Determines Your Tax Liability
If your business is headquartered in one state but you sell your products across the border, do you have to pay taxes in the recipients’ state?
It depends largely on whether you have nexus, meaning an establishment in the recipients’ state. And what constitutes an establishment?
Any of the following might create a nexus in a given state:
- A temporary or permanent office
- A warehouse
- A storage locker in another state
- A sales rep who is active in that state
The rules differ by state
There are a lot of subtleties, and each state may have slightly different interpretations of how the rules work, further complicating the issue.
Take for example, New Jersey, which does a lot of cross-border business with New York and Pennsylvania. It says any of the following may create nexus:
- Selling, leasing, or renting tangible personal property or specified digital products or services.
- Maintaining an office, distribution house, showroom, warehouse, service enterprise (like a restaurant, entertainment center, business center, etc.) or other place of business.
- Having employees, independent contractors, agents or other representatives (including salespersons, consultants, customer representatives, service or repair technicians, instructors, delivery persons, and independent representatives or solicitors acting as agents of the business) working in the state.
We’ve Got Your Back
If you do significant cross-border work, you need to talk to us to make sure you are paying all the state sales taxes you’re supposed to—but no more! We can look at your situation and even connect you with some services to take the administrative burden off your shoulders. Contact KRS CPAs