Nexus Overview

Nexus varies state by state but, generally speaking, the contacts required to generate taxes can be fairly minimal. Furthermore, the term "physical presence" is often misunderstood and can lead to unwanted surprises, including penalties. Other key focus areas include remote employees, and new sourcing rules among others.


What is nexus?

Gary Bingel:

Nexus is really just a fancy word for the minimal contacts that you need to be able to be subject to tax in a specific state. So if you have Nexus in a state you're subject to that state's taxing provisions whether it's income tax, sales tax, etc. Nexus does vary state by state as well as tax by tax. Although there's a lot of differences between the taxes and between the states as to what may constitute a nexus the one thing that's certain is that it's a very low threshold for the contacts that are required.

Gary Bingel's expertise focuses on state and local income taxation, and sales and use tax consulting. He has significant experience serving clients in the manufacturing, retail, pharmaceutical, biotechnology, technology and service industries.

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In this Apportionment overview, Gary Bingel discusses challenges and opportunities and how planning can help manage overall tax liabilities, and knowledge can help mitigate potential exposures and combat aggressive taxing authorities on audit.

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Defensively, your tax team wants to avoid pitfalls associated with nexus. On the other hand, understanding nexus can open the door for opportunities such as Voluntary Disclosure Agreements or amnesty.

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A major nexus pitfall includes unpaid taxes, uncollected sales tax and flow-through entity issues are sometimes missed. Avoiding sticky situations requires an understanding of what creates nexus for different taxes, and in different jurisdictions.