On December 18th, right before shutting down for the holidays, Congress has passed 50 major changes for the upcoming tax filing season. Some of the tax extenders will be quite important, while others may go by without much notice. We’re taking a look at the notable changes.
Some of the previously enacted temporary provisions, have been made permanent:
Businesses that establish nexus within a particular state may be required to meet certain tax compliance requirements even after they stop conducting business within that state. For instance, some states have implemented trailing sales tax nexus rules which require companies to collect sales tax even if they no longer have tax nexus.
Tax nexus can best be defined as the seller’s minimum level of physical presence within a state that permits a taxing authority to require them to register, collect and remit sales and use taxes. In determining whether an out-of-state seller needs to comply with tax nexus laws, it is appropriate to examine a combination of federal and state laws. Having said that, if de minimis activities are performed within a state that establishes only the “slightest presence” in a taxing jurisdiction, it is unlikely that the seller will need to register and collect sales tax in that area. If the company has more than a de minimis physical presence in the state, then sales tax registration and collection would likely be required. Most states characterize “doing business in their state” as regularly or systematically soliciting business either by employees, independent contractors, agents or other representatives or by distribution of catalogs or other advertising matter. It is important to know the rules in each state where your company conducts business.