Nexus

Q: DO STATES CARE WHETHER SALES ARE TAXABLE OR EXEMPT WHEN ANALYZING ECONOMIC NEXUS THRESHOLDS? DO THEY LOOK AT TOTAL SALES OR JUST TAXABLE SALES?

A: It depends on the state. Some states say total sales, including exempt sales, should be included in threshold calculations. Other states say only taxable sales should be included. Some states exclude sales for resale but include other exempt sales. Some states exclude marketplace sales while other states include them. We have a free chart on our website that details what is included or excluded, as well as the economic thresholds, their effective dates, and other useful information. States are continuously updating their information, and as they do, we update the chart. The chart is called Economic Nexus Thresholds and can be found here.

Q: WHAT SHOULD YOU DO IF YOU MEET AN ECONOMIC NEXUS THRESHOLD BUT HAVE EXEMPT SALES?

A: If all your sales are exempt, then make sure you are collecting a valid exemption certificate on all your sales. When it comes to registrations, some states do not require a company with 100% exempt sales to register. However, other states do require you to register and file zero-dollar returns. The risk is when you are not collecting a completely filled out exemption certificate on the correct form.

Q: I’VE DETERMINED ECONOMIC NEXUS IN EACH STATE, BUT I NEED TIME TO RESEARCH. WHAT SHOULD I DO?

A: Once you register, you must collect and remit the tax whether you have nexus or not. In some states, the mere act of registering creates nexus, and in others, you are agreeing to collect the tax. We recommend you hire a third party to help speed up your nexus determination, especially in states where your potential exposure is huge, then go ahead and register where necessary, then collect and remit the tax while registered as you figure out the rest.