Image courtesy of ddpavumba / FreeDigitalPhotos.net
Got Nexus? Not sure? Then you need to grab a cup of coffee and listen to the archive of our recent web seminar entitled '5 Sales Tax Hot Spots", hosted by Joe Woodard with Andy Johnson of Peisner Johnson and Brandon Houk with Avalara (Avalara sponsored the event).
Saying that Nexus is a "Big Deal" does not do the topic justice. But if you read through some of the Q&A (below) that was pulled from the chat log in the web seminar, you will see how broad of a net Nexus covers. From my perspective (I would call it a layman's perspective), if you have clients who sell just about anything, you need to make sure you are up to speed on Nexus and how their business might be impacted by it.
What are the 5 HotSpots? Nexus, Taxability & Rates, Use Tax, Exemption Certifications and Sales Tax Return Preparation. Do any of these sound like some of the questions or topics of conversation you with your clients? If so, the link to the archive is here: https://www2.gotomeeting.com/register/137546922
If you need a little more convincing before you click that link, read the chat log (from various participants) below. There's another link the the archive at the end of the article :-).
Q: Can you define Nexus?
A: Nexus is the minimum link or connection that you must have with a state, before the state can force you to pay its taxes or collect taxes on its behalf.
Q: Would someone selling at a trade show in several states be considered to have nexus in those states?
A: Trade show attendance is an activity that varies wildly from state to state. Some states consider just attending to be nexus creating. Others say you can attend but if you exhibit then that creates nexus. Other states say you can be an exhibitor as long as you don’t solicit or accept orders while there. In addition some states have a threshold as to how many days you can be there while others do not. This would be a great question to discuss in detail. You can reach me (Mike Fleming) offline at 972-277-4820.
Q: I have ebay sellers and ebay only allows one rate. Could my seller charge the lowest rate for CA and could the buyer would pay the difference as use tax?
A: You could but the seller would still be liable in the audit. The burden of proof would be on the seller that the difference was paid. It sometimes gets paid twice. May clients choose the higher rate and deal with complaints on a one off basis.
Q: If the delivery cost includes handling fees, is it taxable.
A: State by state answer- In some states yes and in some states no. I (MIke Fleming) would be happy to discuss in detail offline at 972-277-4820.
Q: In CA we have use tax for items purchased out-of-state. If my client does not charge sales tax on CA sales could the buyer be made responsible for USE TAX? This way an online seller does not have to hassle with the district taxes.
A: Great question- Unfortunately the state audits buyers and sellers. It is the buyer’s responsibility to pay but the seller’s responsibility to collect. Sometimes the state ends up collecting from both if they don't communicate with each other and even then you have to prove it. The state will not check for you.
Q: Employee's in another state creates nexus..i understand if they are working in that state perhaps selling goods.. but what if they only do computer work.. say processing invoices or bookkeeping. DO not interact with anyone in that state.
A: This is a state by state question and could actually differ depending on whether we are talking about sales tax or income tax. If you would like to discuss specifics I (MIke Fleming) can be reached at 972-277-4820 and would be happy to discuss offline.
Q: Sales to other states resulting from your dealings with the customer by phone or in person (in your own state) -- does this create Nexus. No online sales. Shipped to client . not online sales.
A: If everything is done over the phone and you have no other connections including third parties acting on your behalf then you would have no exposure.
Q: So you have white paper to provide to clients to educate them?
Q: Define substantial physical nexus
A: Unfortunately substantial physical presence has not been defined. This is one of the reasons nexus is not cut and dry and varies among the states. According to the US Supreme Court in Quill we know that it is more than 3 diskettes, but other than that it is a very grey area. On a planning basis it pays to be conservative. If you are being audited you want to make an argument.
Q: a subcontractor in another state... define subcontractor in this case. ex: a salesrep? a guy who supports your website in Arizona part time ? Vendor vs subcontractor ?
A: The Supreme Court has said that any third party who helps create or maintain a market is nexus creating. This is a pretty big net. It usually includes sales, collection, installation, repair, maintenance, training and so on. If you want to discuss in detail call me (Mike Fleming) at 972-277-4820.
Q: If a client has been non compliant and we want to get him compliant, how do we manage the transition ? Ignore the past ? Calculate and pay ?
A: VDA - Call me (Mike Fleming) at 972-277-4820.
Need to speak with someone directly? Call Mike Fleming, Peisner Johnso at (972)277-4820.