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New Jersey Nexus Determination

All Would appreciate hearing back from folks with experience as a company based outside New Jersey selling products into the state. Am trying to understand the ins and outs of their sales tax nexus determination. Many thanks in advance. Welles Hatch

Answers

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

Nexus years past couldn't be proven unless you have direct presence, employees, property etc in a state.

But states are hurting for cash and are using economic presence as a determination as to whether or not you have a nexus. Did you derive gross receipts from the state?

It's going to be a tough fight, and ultimately a Supreme Court test as to inter-state commerce.

The best advice is determine whether doing business in that state is worth the headache, fight the state and advise the state in the end that you will no longer do business. Also publicize your decision. Consumers (whomever they are) may start providing pressure on politicians to stop playing games...

Chris Shumate
Title: Accounting Manager
Company: Dominion Development Group, LLC
LinkedIn Profile
(Accounting Manager, Dominion Development Group, LLC) |

Adding something to what Wayne says above, if a company based outside of New Jersey sells products in New Jersey, it may not have to charge sales tax, but the purchaser will more than likely have to pay use tax. I say more than likely because I am not familiar with NJ tax laws; however Tennessee, Kentucky, Florida, Kansas, etc. have these rules.

Use tax is almost always the equivalent of sales tax. Either way the state will try to get their money. Use tax is currently on the honor system in most states.

So if your company is located in NJ, and the seller isn't, nor does it have nexus, your company will be liable to pay use tax on the purchases from the out of state seller.

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

Chris -

While absolutely accurate;

except when you buy a used car/boat (something that needs to be registered) - who here has ever paid Use tax?

Chris Shumate
Title: Accounting Manager
Company: Dominion Development Group, LLC
LinkedIn Profile
(Accounting Manager, Dominion Development Group, LLC) |

I assume, Wayne, you are asking in reference to those that have paid Use tax for their companies and not those who may or may not have personally. Our company tries to catch everything due for Use tax. I am sure some get past, but we make an honest attempt to pay when we should as a company. Our company has the thought process of "Render unto Caesar that which is his." It has been good for me too, that is why I was originally hired nearly 3 years ago.

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