Economic Nexus
'Nexus' is the relationship between a seller and any state that requires that seller to register, collect and remit sales taxes for the state. A wide variety of business activities ranging from a physical presence to a specific dollar-value of sales threshold may establish nexus with a specific state. Now, here is the bad thing... the relationship and business activities required to establish nexus vary from state to state.
As a result, if you do business outside of your own resident state, you need to know what business activities trigger nexus for each state in which you do 'any' business. You need to then determine whether you have created a nexus relationship based upon those business activity triggers (or if you will at some point). You also will then need to know what you must do if in fact you have established a nexus relationship with one or more specific states.
The good news is that one 'sales tax expert' makes available a FREE (that's what I just said, 'Free') tool to help you assess if you have any nexus relationships with any states outside your resident state. After using this free tool you will know in which states you have likely sales tax nexus relationships existing and therefore the obligation to collect and remit sales taxes to the appropriate taxing authorities.
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While there are many ways in which you may establish a nexus relationship, the Avalara tool is designed to assess 'economic nexus' only by asking you about states where you currently do business but don't collect sales tax in contrast to states where you do business and collect and remit sales tax. The tool will also make the assessment based on how much business you do in those states where you are not presently collecting and remitting sales tax in terms of both dollar amount and number of transactions.
In order to prepare for the free assessment you will need to have your financial (transactional) information available in such a way as to be able to address the needed information. And, while it would be best if you were look at 12-months of data, like last Calendar or Fiscal year, the assessment can actually be performed with less information, although the analysis may require more interpretation as part of the free consultation you will also receive.
And that brings me to the 'output' you get from the process. Your report from the assessment will include a list of the states where you most likely have established 'economic nexus', and the associated threshold(s) that resulted in those relationships being established. You will also receive a free consultation designed to assist you in understanding the implications of 'economic nexus' in each of the identified states, what the requirements are related to those states, and how you should go about getting into compliance.
"Don't wait for nexus to bite you on the ________ (another word for, 'behind', use your imagination)... begin the process of getting nexus compliant now." An easy way is with the absolutely free tool that Avalara is making available to everyone. If you are an accountant, bookkeeper, business advisor or QuickBooks ProAdvisor you can assist your clients with nexus simply by either pointing them to this free tool, or helping them use it. While you are there be certain to take a look at, or help your client with, the other products Avalara offers to help get you and keep you 'sales tax compliant'.
This is an editorial feature, NOT sponsored content. While it may contain references to a vendor's website(s), and/or appear to promote or endorse a specific vendor product or products, the actual feature is intended as an informational resource for our readers, not sponsored product promotion.