Working with an experience tax professional for tax preparation and tax planning services allows business owners to better manage their tax liabilities. For small business owners, taxes are usually their largest expense. Understanding how states tax businesses is important as it allows the business owner to minimize his or her tax liabilities and to avoid unexpected and unpleasant audit adjustments.
Peisner Johnson & Company of Plano, TX, a firm devoted to state and local taxes, shared with us its 10 Most Common Nexus-Creating Activities for Sales & Use Tax. Nexus is the tax terminology for the amount of contact a taxpayer has in a state that makes the taxpayer subject to the tax in that state. Peisner’s top ten activities for creating sales tax nexus are:
1. Ownership of real property (stores, warehouses, offices, etc.)
2. Ownership of personal property (machinery, equipment, furniture, etc.)
3. Leasing of real property
4. Leasing of personal property
5. Maintaining inventory, whether consigned, stored or carried by sales representatives
6. Travel of employees into a sate to conduct sales, training, deliveries, installations, repairs, etc.
7. Delivery of property into a state using seller-owned vehicles
8. Use of independent sales or manufacturer’s reps, even if they do not work for you exclusively
9. Use of sub-contractors for repairs, maintenance, installations, etc.
10. Allowing employees to telecommute or use a home office
While the first seven items would be of no surprise to most business owners, using independent contractors and the inclusion of the telecommuting or home office employee show how states have adapted to the new working environment facing employers. As more employers are allowing employees to work at home, employers may unknowingly be creating tax problems for themselves when the employees live in a state other than that where the employer is located.
If you want to learn if your company’s activities in a state has created nexus for sales, income, franchise or other taxes, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.
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