There are two critical components to determine where you have to collect sales tax: Nexus and the taxability of your products and services.
At Peisner Johnson, we always say, “Start with Nexus”. In fact, Andy Johnson, one of our founding partners, wrote a best-selling book on the subject. Without going into too many details, there are two important types of nexus to be concerned about:
Physical Nexus
Anything that gives your business a physical presence in a state – locations, employees, contractors, inventory, etc.
Economic Nexus
The thresholds that must be met for remote sellers to be required to collect and remit sales tax. These thresholds are usually revenue or transactions (or both)
After you determine your “Nexus Footprint”, it’s important to understand the taxability of your products and services. If you’re going to be responsible to collect tax, it will be important to be accurate, and there are hundreds of state, city, and county jurisdictions that have their own tax law determining the taxability of your products and services. For some, it might be as simple as only selling tangible products that are taxable in every jurisdiction, but for some, it can be quite complex. You may sell supplements, food, medical supplies, eyewear, clothing, or a number of other goods which may be taxed at a reduced rate, or not taxed at all. Additionally, those selling tangible products and services will likely face a much more complex structure.
We offer services to both determine your Nexus, and the taxability of what you sell. Together we can help you understand where you should register, and on what sales you should collect tax.
