Nexus for a business was originally interpreted as a business with a warehouse, retail location, sales person, or distribution center in a state. With expanded definitions being adopted by states, this definition can also include:
- Any associated business that shares the trademark or a substantially similar name (as is the case for Amazon’s distribution center in Texas);
- Affiliates that run “click-through” sites on behalf of Internet retailers (if the affiliate lives in a particular state, then the sales taxes will need to be collected and remitted by the Internet retailer that received the click-through);
- Repair and maintenance service locations (including on-site installations); and
- Shipping of returnable containers into a specific state.
Important to you is how nexus laws can affect your business. One business using Microsoft Dynamics GP found that they were not compliant and needed to register in every state since they do installations on-site for every customer, which creates nexus. As a result, they shopped for an
States regularly offer amnesty time periods where a company is able to register without penalty and bring themselves into compliance in that state. In addition to taking advantage of these time periods within each state, a business can contact each customer to ensure they paid the use tax on the purchase, and where they didn’t, document and bring their business into compliance.
Avoiding an audit is always preferred and most businesses find that proactive sales tax compliance activities enable them to prevent and reduce audit exposure and risk. Automation has been proven to be the most reliable method to reduce audit risk and costs associated with compliance.
One company found that employing the
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