Performing Multistate Nexus Reviews: Assessing Sales, Income, and Other Tax Exposure

Where businesses collect, how they collect, and what they collect among the more than 10,000 taxing jurisdictions in the U.S. can be simply mindboggling. Calculating how much a business owes at any given time can be equally daunting when a practitioner doesn't know the steps to assess business filing obligations in other states. Our experts will explain the process of determining whether an entity has a reporting and payment obligation for income, sales, and other taxes outside its home state.

Doing business in a new state brings new opportunities and, typically, tax compliance burdens. Practitioners are often asked to weigh the filing burden and associated costs against the potential risks of noncompliance when a business enters a new state.

Tax advisers may assess an entity's exposure to state tax liability to determine whether prior-year filings are in order or whether to file going forward quietly. Considering state income tax and sales and other local taxes, the complexity of SALT can be daunting.

Nexus is the threshold of business activity that creates an obligation to collect, report, and remit tax in a state. Determining whether a taxpayer or entity is "doing business in" a state to meet the threshold can be difficult. Some businesses erroneously believe that even after Wayfair, they are protected by Public Law 86-272 because the business' presence in a state is minimal.

However, this protection is limited to the selling of tangible personal property. Entities may have economic nexus without facilities, employees, or tangible property in a state that triggers tax obligations, and noncompliance can be costly. Technology makes it simple for businesses to reach out-of-state customers, making SALT expertise necessary for tax practitioners.

Listen as our panel of experts explains the steps they use to perform out-of-state nexus reviews for clients, including identifying clients with state tax exposure, typical state nexus thresholds, and handling missed reporting and tax liability obligations when found.

1. Laying the groundwork
   1. State sales tax nexus
   2. State income tax nexus
   3. Other state tax nexus
2. Identifying potential exposure
3. Managing exposure
4. Best practices when entering new states

The panel will review these and other issues:

• Establishing best practices for performing an out-of-state nexus review
• Determining whether other state filing and reporting obligations may exist
• How is nexus determined in most states for state taxes, including income and sales taxes?
• How should prior unpaid liabilities and reporting obligations be handled?

Learning Objectives

After completing this course, you will be able to:

• Determine when a business can rely on P.L. 86-272
• Identify the conflicts between P.L. 86-272 and post-Wayfair economic nexus
• Ascertain how various states are interpreting and regulating nexus post-Wayfair
• Recognize other steps that states are taking to expand their tax base by taxing out-of-state businesses
• Verify that best practices are being used to limit liability for unpaid taxes to foreign states where an out-of-state business has nexus

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or tax firm experience at mid-level within the organization, preparing complex tax forms including state tax returns and information filings. Specific knowledge and understanding of nexus regulations governing the state and local tax liabilities of out-of-state businesses selling tangible personal property in foreign states, providing services to customers in foreign states; familiarity with P.L. 86-272, the Wayfair decision, marketplace facilitators, and reporting and payment obligations for various taxes based on nexus.

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