Small Businesses Be Aware - NEXUS has Changed for State Sales Tax

On June 21, 2018, the United States Supreme Court overturned exiting legal precedence that required physical presence as a requirement for nexus in order for states to collect (and pay) sales and use tax from businesses.  In other words, in South Dakota versus Wayfair, Inc, the court ruled that in additional to a physical presence, there are other manners in which nexus can be determined by a state; such as number of sales transactions that occur within the state, or total amount of annual sales.

• Economic nexus is an obligation to collect tax imposed on sellers based on a level of economic activity within a state. 
• Different from a physical presence nexus, economic nexus is based instead, on sales or on transactions. 
• The criteria for economic nexus varies by state.

Small businesses need to be aware of these changes, since we may need to collect and pay sales or use taxes to states beyond where our business is located. 

• Applies to both online and off-line sales
• Several different states currently have nexus laws
• Burden is on the small business to either pay the taxes or provide proof of rebuttal – not meeting the minimum requirements.

There are different types of nexus.

• Click-Through Nexus
• Affiliate Nexus
• Economic Nexus
• Marketplace Nexus

It is important to consult with your attorney and CPA to determine which nexus rules may apply to your business.

The following states have economic nexus laws.  Some of which go into effect as soon as July 1, 2018.  These laws change constantly, so please consult your accountant or attorney if you have any questions – and for the most up-to-date information.

Some sates have a rebuttable provision – meaning you have the opportunity to prove you don’t need to pay.

Other states are irrebuttable – meaning it’s impossible to turn over the state’s law no matter how strong your proof is that you don’t need to pay.

Arkansas - rebuttable

Threshold: More than $10,000 during the preceding 12 months.

California - rebuttable

Threshold: More than $10,000 and more than $1 million in annual in-state sales.

Connecticut - irrebuttable

Threshold: More than $2,000 during the preceding four quarterly periods.

Georgia - rebuttable

Threshold: More than $50,000 in the preceding 12 months.

Idaho - rebuttable

Threshold: More than $10,000 in the preceding 12 months.

Kansas - rebuttable

Threshold: More than $10,000 during the preceding 12 months.

Louisiana – rebuttable

(Goes into affect April 1, 2016)

Threshold: More than $50,000 during the preceding twelve months.

Maine - rebuttable

Threshold: More than $10,000 during the preceding year.

Michigan - rebuttable

Threshold: More than $10,000 during the immediately preceding 12 months.

Minnesota - rebuttable

Threshold: More than $10,000 in the 12-month period ending on the last day of the most recent calendar quarter before the calendar quarter.

Missouri - rebuttable

Threshold: More than $10,000 in the preceding 12 months.

Nevada - rebuttable

Threshold: More than $10,000 in the preceding quarterly four periods.

New Jersey - rebuttable

Threshold: More than $10,000 in the prior four quarterly periods.

New York - rebuttable

Threshold: More than $10,000.

North Carolina - rebuttable

Threshold: More than $10,000 during the preceding four quarterly periods.

Ohio - rebuttable

Threshold: More than $10,000 during the preceding calendar year.

Pennsylvania - irrebuttable

Threshold: There is no threshold specified, so assume you owe sales tax if you have click-thru nexus.

Rhode Island - rebuttable

Threshold: More than $5,000 during the four preceding quarterly periods.

Tennessee - rebuttable

Threshold: More than $10,000 during the preceding 12 months.

Vermont - rebuttable

(Begins July 1, 2018)

Threshold: More than $10,000 in the preceding tax year.

Washington - rebuttable

Threshold: More than $10,000 in the preceding tax year.

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