Well, Nexus is not an ailment, but you can check for it if your business has one or both of these:
1) Economic Nexus is based on your volume of sales in that state.
2) Physical Nexus is where you have a physical presence in the jurisdiction or state to collect and remit sales tax.
Both of these Nexus rulings have various nuances.
For example, physical presence can mean more than just an office or warehouse. It could be triggered simply by having a sales representative based in that area.
A quick Nexus consult will help determine if you should consider registering.
Which types of businesses will the Sales Tax changes affect?
Any business that sells goods and services across multiple states and jurisdictional boundary lines is affected, regardless of the method of sale or the end-customer.
What should businesses be doing right now?
Prepare for increased collection and remittance responsibilities by:
Gathering data on gross revenues and/or the number of transactions that occur within states where the company sells remotely.
Prioritizing states where the company has the greatest economic presence and creating a plan to register to collect and remit sales taxes (e.g., via a marketplace, or with a hosted or cloud-based technology solution).
Evaluating the financial statement impact of remote seller compliance.
Reviewing invoicing processes and controls. Invoicing errors that occur after the decision is finalized will most likely result in lower customer satisfaction and increased cash flow risks.
I am a Wholesaler. Do I need to worry about it?
If a business meets the Nexus thresholds in a state that collects sales taxes, regardless of exempt status, then the business should register within that state.
This ruling is applicable to all transactions regardless of the method of sale.
While you may not be subject to collection and remittance requirements due to the nature of your business, you may still have additional filing and reporting obligations.
I've been collecting taxes wrong (or not at all). Is it better to go to the State or wait for the State to come to us?
It really depends on the volume of your sales and the potential tax liability you have incurred.
CereTax can help evaluate your situation and create a plan for if/when/how you address the issue and determine if a Voluntary Disclosure Agreement (VDA) is appropriate.
What is a Purchase-Side Taxation review?
Most enterprises purchase millions of dollars of products and services that are used in everyday business as well as in the manufacturing process.
In most cases, the enterprise elects to self assess taxes, and yet we still see thousands of invoices that have sales tax applied by the seller.
Limitless factors determine if/how a product is taxable, including how the product is used and where it is used.
A Purchase-Side Taxation review looks both at purchases where tax was applied, and where the enterprise is self-assessing.
CereTax ensures the products are correctly identified or "mapped" to the correct taxability categories and ensures the correct taxes are remitted.
What is Truth-in-Billing?
It simply means that what you present on a customer invoice is what the charge is intended for.
For example, some companies faced fines and class action lawsuits because they misrepresented a Cost Recovery Fee, that they chose to impose on their customers, as a tax. A tax implies it was mandated by the government, when in fact it was not.
Applying a Cost Recovery Fee or other Surcharge to a customer invoice is a completely legitimate way some companies help pay for the cost of staying compliant with local, state, and federal government regulations. However, it must be completely transparent that the Fee is not represented as a mandated government charge.
On the flip side, your competition may choose not to assess any Cost Recovery Fees or additional Surcharges on their customer invoices, resulting in a lower overall cost for the exact same products sold.
In addition, some Fees that are in fact mandated by the government can be passed through to the customer while others cannot. It is important to know what applies to your business and exactly what you can and cannot represent on a customer invoice.
What happens if I do not collect any Sales Tax from my customers?
It depends on your exposure.
You are opening up your business to potential audit with substantial fines and penalties if you neglect to appropriately collect taxes from your customers.
You are also not able to go back to your customers in arrears for these uncollected taxes.
Those uncollected taxes will need to be paid out of pocket to every jurisdiction where you have a liability.
I only sell to other businesses. Aren’t my transactions tax-exempt?
Maybe, but not necessarily...
Depending on the state and the product set, B2B transactions are still taxable. In some cases even with an exemption certificate, your customer may be exempt from one tax but not another on the same product, in the same state.
What happens to the value of my business if I do not collect the right sales tax?
We have seen more than our fair share of business sales go awry because of an unrealized and undisclosed tax liability that rears its ugly head during the due diligence process.
If you are thinking of raising capital or selling your business, you need to know ahead of time if you have a possible unfunded liability.
These liabilities can dramatically effect valuations, price, and terms of any business sale or merger.
Our company just passed an audit with a “No Change” result. Why should I consider a Purchase-Side evaluation?
A “no tax due” is usually considered desirable.
You must keep in mind though, auditors are evaluated on tax dollars recovered per hour.
Audit procedures are designed to uncover tax deficiencies in the least amount of time possible. They are not designed to look for tax overpayments.
You may actually have significant recoverable overpayments that would never appear in an audit.
We always get refunds when we file? Isn’t that a good thing?
A Sales and Use Tax refund is not always a good thing. It could be a symptom of a much larger and expensive problem.
Cost Recovery Fees, lost opportunity costs, unrecoverable errors, and internal resources are just a few costs associated with refunds.
Why not get the tax right on the front-end and avoid refund errors altogether?
Do you want to know how much money overpaid and underpaid errors are costing your company?