So, what exactly is nexus? By definition, nexus is just a connection. In the tax world, that is the basis of nexus, but there is much more to it. With businesses, having nexus in a certain location means that you either have a liability there for payroll taxes, property taxes, or sales taxes. With property nexus, if your business is in a certain state, you are required to pay taxes in that state. This also means that if you store a certain amount of inventory in another state, you could be liable for sales tax there, even if you don’t sell or ship goods to that state (think consignment or Fulfillment-by-Amazon). 

This does not mean that you are off the hook if you do not have physical presence in another state as far as sales go. Now, states have thresholds for businesses to be liable for taxes in another state (all states have different rules, so research this on each state you ship to or do business in). Some states only have a threshold of a dollar amount or a transaction volume, but others have a lesser-of situation. Same goes with the kind of good that you are selling. Some states tax clothing or groceries, while others do not. Again, it just takes research on the specific jurisdiction that you sell in or to.

You might think, “Great! I don’t sell goods, so I don’t have to worry about this nonsense’’. Possibly, but wait, you could be liable, even, for payroll taxes in another state. Just like with sales tax and property nexus, it all depends on any employee you have that works from home and your business location’s jurisdiction. If your employees are working from home (and let’s be honest, most people are nowadays), then depending on the amount of days they worked from their home location (in a different state than your business location), you could be responsible for paying your portion of payroll taxes to that state as well. Many states have agreements with some neighboring states on credits and so-forth, and the Remote and Mobile Worker Relief Act of 2020 provides some relief, but some businesses could still be affected, especially if remote work is not new to you.

Check with the specific jurisdictions that may affect your business to make sure you are compliant with your local rules.

For more information on remote working and how nexus could affect you, visit our blog post here: https://www.bookwormaccountant.com/how-nexus-can-affect-you-as-a-remote-employee/