Updated: Sep 26, 2024 If you’re running a business or if you are a bookkeeper trying to figure out sales tax, you’ve probably heard about “nexus.” It’s super important to understand because it can affect you or your client's tax responsibilities. Let’s dive into the three big questions people usually ask about nexus.
Key Takeaways:
Do I Have Nexus? First things first, what is nexus? Simply put, it means your business has a significant presence in a certain area that makes you register to collect sales tax there. There are two kinds of nexus: physical nexus and economic nexus. A business is required to register to collect sales tax in a jurisdiction if either one is triggered.
Can You Just Ignore Sales Tax Registration? Short answer: Nope! Just because you don’t want to deal with it doesn’t mean you can ignore it. If you don’t register to collect sales tax, you could still face audits and penalties later on.
What Do I Do After Registering? After registering, the next step is to create a sales and use tax plan. This involves determining:
Which goods or services you sell that are taxable and which are exempt.
What documentation is required when selling non-taxable items.
The current tax rates applicable to your products.
You'll also need to decide whether to file your tax returns yourself or hire someone to assist you. Whichever option you choose, ensure it’s both cost-effective and scalable as your business grows.
Our mission to provide a resource so business owners, accountants and bookkeepers can understand sales & use tax compliance. We know that sales and use tax laws are not the easiest to understand. Our focus is on empowering you with a framework and general understanding, so you know what questions to ask and where to go to get the information you need to stay on the right side of sales and use tax compliance.
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