Technology has paved the way for many business owners to find potential clients outside their community. Online stores make it challenging to collect in-state taxes, leaving tax laws complicated in these areas of revenue collection. Thus, a new mandate has been imposed called the economic nexus to ensure that taxes are collected from businesses with an in-state presence.
Whether you’re a new business owner or have been in your entrepreneurial journey for quite some time, this concept of nexus may seem all-new to you. In this post, you will discover the things you need to know in order to make your business nexus compliant for the upcoming tax year.
Review your nexus considerations about potential customers
The economic nexus is heavily applied to businesses with headquarters in one state but have an influx of customers in another. To make your business nexus compliant, you have to think about where your potential customers are and what are the current and pending laws on that state.
This should be considered even if you don’t have a physical store in those areas–it’s all about where your clients are. For example, the state of South Dakota requires business owners to file a sales tax if there’s a revenue within the state starting from $100,000 or more. There are also laws in various states regarding the number of transactions. If you reach the threshold number of transactions in that state, it is best to log all of these transactions for future tax filing.
Consider multiple sales in multiple states
If you are an online business selling nationwide with a large number of sales in different states, you also need to assess your nexus compliance per area that you are marketing to.
Reviewing your presence (whether digitally or physically) in each relevant state can help you avoid penalties about the current nexus and sales tax laws. To make this simple, you can hire a third-party assessor to see how much revenue you received and if these sales reach the threshold of the current nexus laws per state. For many business owners, taking the step of hiring help is crucial to avoid the burden of calculating revenue and transactions per area of business.
Record your selling platform compliance
As mentioned in the previous points, the current nexus and sales tax laws do not discriminate regarding physical stores and online sales. Since many businesses now operate using both platforms, it is crucial to keep a record of physical store sales and transactions which are done digitally.
The government is now performing due diligence in collecting taxes on all platforms of business operations, so it is important to keep a record of all your sales and take note of those states in which you have considerable revenue.
Take note of all filing deadlines
How can one avoid getting flagged for random audits? It is also important to take note of filing deadlines if you have a business presence in multiple jurisdictions. Many business owners can easily assume that they will go through the tax season unscathed only to be left with a warning of noncompliance.
Thus, it is best to also keep a record of all the filing deadlines on states where you had considerable transactions. Since nexus laws vary by state, having a streamlined process where you keep all the location records of sales can help in this area as you submit your tax documents.
Think about your tax compliance systems
Many entrepreneurs will discover that along with their business growth, tax compliance becomes even more complicated. What once was a simple tax compliance system that you can do manually becomes a rigorous record of details that can be quite challenging if you have other tasks to accomplish.
The benefits of having a digital tax compliance systems include:
- Ease of record: No longer do you have to keep multiple logbooks for all your transactions or have paper receipts. You can have sales records in one place for various products or services you are offering.
- Professional assistance: During tax season, expert tax compliance third-party services can help you with complications that you will meet during filing. This professional assistance can save time and effort in completing all the forms you need.
- Simplified process: Having third-party services especially those which have digital access allows you to have a simplified revenue recording and tax filing without the hassle of doing all of these processes manually.
The simplest way to avoid nexus-related problems in your sales tax is to find services that will help you get into detail about specific state laws regarding your business presence.
Succeed in Nexus Compliance: Finding Modern Solutions
Tax laws can get complicated especially if you are on track to business growth. With these top things to keep in mind, you can find modern solutions to succeed in nexus compliance.