Even if your small business doesn't have out-of-state offices, you might still have nexus in another state. Karen Stern, Partner in Charge of the Brown Smith Wallace Entrepreneurial Services Group, discusses the importance of a multi-state nexus review, in this month's "Financial Fitness," as featured in Small Business Monthly.
The start of a new year is a perfect time to review the prior year's business activities, including a multi-state nexus review. In our experience, understanding nexus can be daunting for businesses, but it doesn't have to be.
While it may be clear that a business has nexus in its headquarter's state, or a state where it has an office or employees, there are some less obvious activities to consider:
- Sending an employee or independent representative to a state to assist customers with installation; provide repair or maintenance services; or provide technical assistance, such as engineering or design assistance
- Having an employee or independent representative solicit sales in the state
- Licensing intangibles that are used in a state, such as trademarks/trade names or software
- Having an economic presence in the state – no requirement for any in-state presence. Currently, ten states have established "factor nexus" or "economic nexus." This type of nexus can be triggered if a business exceeds certain in-state thresholds. In 2016, three states – Alabama, South Dakota, and Tennessee – changed legislation or adopted regulations to establish this type of nexus.
The overall goal of a nexus review is to help management understand the state tax landscape and its application to the business, allowing management to make informed decisions and minimize tax surprises.
If you would like to conduct a multi-state nexus review, contact your advisor or Amy Jackson at ajackson@bswllc.com or 314.983.1336.
To find out more about your nexus review, contact Karen Stern, Partner in Charge, Entrepreneurial Services Group, at 314.983.1204 or kstern@bswllc.com.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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