Sales Tax Nexus Study

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Sales Tax Nexus represents the level of connection between a taxing jurisdiction and an entity, such as your business. Until this connection is established, the taxing jurisdiction cannot require your entity to collect or remit sales tax. Although the U.S. Constitution and various U.S. Supreme Court decisions stipulate that a substantial physical presence is required to establish sales tax nexus, there is no shared definition of what constitutes physical presence and, while certain activities clearly create sales tax nexus, state interpretations are vague and ever-changing.

Once sales tax nexus is established, you must register immediately with the taxing jurisdiction. If sales tax nexus was created in the past, it is important to know that states can assess tax on non-registered entities back to the date sales tax nexus was established, plus penalties and interest. And since sales over the internet are not protected under the Internet Tax Freedom Act (a common misconception), the underpayment exposure may be much larger than expected.

There are various alternatives to address this situation, but the first step is understanding your entity's sales tax nexus position. Even if you've previously reviewed your sales tax nexus footprint, you should update your sales tax nexus position if your entity's activities have changed.

Yetter Consulting Services (YCS) can analyze your business locations and activities to determine where sales tax nexus has been established and a responsibility to register and collect tax exists. Through the use of a detailed questionnaire and personal interview process, YCS will review your operations and activities in all jurisdictions where you are not currently registered and compare results with general sales tax nexus provisions. Based on your needs, YCS can provide results in a simple matrix format or a detailed report, with recommendations for the various jurisdictions.

Although our main focus is the determination of where your company has established sales tax nexus, we also include some discussion regarding potential liability for other taxes. Depending on the results format chosen, we can help you quantify the potential tax exposure and provide alternatives of how to proceed. Recommended actions could include amnesty, voluntary disclosure, prospective registration, activity monitoring or even deregistration.

If you would like us to contact you to discuss our sales tax nexus study services and the various roles in which we could assist you, click here.

Learn more about nexus - Check Out Our White Paper "5 Things to Understand about Your Nexus Footprint", a collaboration with Sabrix, Inc.

Read our sales tax nexus case study

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