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Easy way to identify sales tax nexus

Does anyone know of an easy way to identify whether non-sales employees working in a particular state establishes nexus for sales tax purposes? We have remote employees (not involved in sales) working in several states, and we need to determine definitively whether these employees establish nexus. I have gone to the www.salestaxsupport.com web page, but the guidance there is very general. I have also reached out to a sales tax person referenced on that same site without a response. I would like to think this is a pretty simple yes/no exercise, but I also know taxes are never as simple as they seem. Thanks!

Answers

Sara Voight
Title: Controller
Company: Critical Signal Technologies, Inc
(Controller, Critical Signal Technologies, Inc) |

I don't have a list of states that do/don't count employees as nexus material, but I am aware that more states are doing this. If I recall correctly, states like Washington and New York are 2 who don't care who is earning a paycheck in the state. If your company is paying someone there you have 'earned' nexus.

My approach to sales tax is based on where the product or service is received or used. Many states have revamped their tax code to include digital technology in addition to tangible products. We sell monitoring services and lend the equipment to use to connect to us. (If you lose the equipment and have to pay for it, sales tax is added to the invoice at that time.) All of our servers and backup servers, care center staff, and operations are out of Michigan. More and more of the states we service clients in are telling us that this service is taxable by them. This adds to the complexity, but we avoid having to keep track of who is working where and doing what.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

I have found that the definition of nexus is different in each state. Michigan once tried to establish nexus over a company I was at, because we paid an independent contractor who lived in Michigan but provided services anyplace but Michigan.

They found us through the 1099. Now that was really reaching. Other states feel that if a salesperson comes into their state, there is nexus vs having a sales office in that state.

Some states are even making it quite impossible to obtain a sales tax certificate because they insist on having the owner take full financial responsibility. Which part of the sanctity of a Corporation don't they understand, and what happens when you have multi-level corporate ownership (but I digress)?

I see three choices (until there is a sales tax revolt).

1. Charge everyone sales tax and use a 3rd party to help you manage that aspect.
2. Charge those customers who you really believe live in a nexus state (other than your own); make sure you document everything!
3. Charge only in your home state and let the foreign states find you and make the case that they have nexus (make sure you document everything!).

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