Sales tax compliance is notoriously complicated for many businesses, particularly those that sell more than one product and collect in more than one tax jurisdiction. As accounting professionals well know, keeping track of inconstant rates, rules and regulations is taxing. An unhealthy dose of stress is added whenever there is confusion over what triggers a sales and use tax obligation. And there is almost always some degree of confusion.
Nexus has long been defined as the physical connection between a taxing authority and a business that triggers a sales and use tax collection obligation. Yet in recent years, many states have stretched the definition of nexus to include less concrete connections. In other words, businesses don’t always have to be physically present in a state to create a tax obligation.
More than 20 states have enacted click-through or affiliate nexus laws, which base nexus on the relationship between an out-of-state retailer and in-state referrals. These include the following:
Similar legislation is under consideration in at least four additional states: Nevada, South Carolina, Tennessee, and Washington; and expanding nexus is a topic of conversation in still others. While this may be good for state sales tax revenue, it creates a sales and use tax compliance nightmare; since states are independent-minded, every remote sales tax law is different.
Knowing what triggers nexus where will enable you to guide your clients unscathed through the treacherous path to remote sales tax compliance. Read on for a list of three top nexus triggers, and a solution.