As a small business owner, you’re facing a lot of tax issues these days. And chances are there is one big tax issue you might not have even heard of. That something is called ‘nexus.’

Nexus means connection. If you have certain types of connection to a state, you have nexus. If you have nexus in that state, you may be responsible for collecting and paying sales tax and even paying state income tax in that state.

This is suddenly becoming a major issue for one big reason. States are broke. The federal government has other ways to raise revenue, or more likely, increase cash. The states can’t fire up the printing press in the basement. They only have one surefire economic stimulus package. That stimulus package is you.

The problem is that there isn’t one clear-cut definition of what it takes to have nexus. The US Supreme Court has been asked to intercede in specific cases this past year and they have declined, stating that it’s up to Congress to make that decision. And Congress has bigger issues then state squabbles that increase the federal government revenue.

So we’re left with a situation that at least when it comes to sales tax nexus information, there are 50 different versions. Or at least it seems like it. For the most part, states require some kind of physical presence inside their state to have nexus. That would mean that there is an office, fulfillment or employees inside that state. But some states are creating new rules.

For example, most states say if you work for a few days or weeks, you don’t have nexus. So, if you fly to Chicago to do a two day seminar, you don’t have nexus. Texas and Hawaii are very aggressive, though, claiming you have nexus if you work just one day in the state.

California is another aggressive state, with new rules stating that if an owner lives in the state, there are any independent contractors in the state or if 25% of all sales or more are made in the state, that California has nexus.

Once you have nexus, you’re responsible for sales tax. Even if you don’t collect the sales tax, the state is going to make you pay it.

The answer, of course, is to collect sales tax even if you have the possibility of nexus being attributed to a state. The problem is that sales tax adds another wrinkle because what’s taxable in one state is not taxable in another.

In fact, there are some crazy rules. For example, if you end up with Illinois nexus and you sell candy to someone who lives in Illinois, you’re going to have to collect sales tax. Or rather, you’ll have to collect it if you candy is subject to sales tax.

Illinois law is a little tricky here. Candy is taxed at a higher rate than food. Some examples of candy are: chocolate bars, yogurt or chocolate covered nuts or fruit, honey coated nuts, caramel popcorn, lollipops, snack mixes containing yogurt of chocolate, breath mints and gum.

But then there are the things you might think are candy that are really food. For example, Illinois says that chocolate covered cookies, yogurt covered pretzels, “candy” that contains flour, plain dried fruits and nuts with no added sweeteners are not candy. They are taxed at the lower food rate.

Don’t assume that you know the state sales tax laws. Every state has their own interpretation. It will take some research every time you have another state that gets added through nexus. Don’t skip doing your due diligence. It could become a very costly mistake.

Author: Diane Kennedy
Article Source: EzineArticles.com
Provided by: Mobile device news

As a small business owner, you’re facing a lot of tax issues these days. And chances are there is one big tax issue you might not have even heard of. That something is called ‘nexus.’

Nexus means connection. If you have certain types of connection to a state, you have nexus. If you have nexus in that state, you may be responsible for collecting and paying sales tax and even paying state income tax in that state.

This is suddenly becoming a major issue for one big reason. States are broke. The federal government has other ways to raise revenue, or more likely, increase cash. The states can’t fire up the printing press in the basement. They only have one surefire economic stimulus package. That stimulus package is you.

The problem is that there isn’t one clear-cut definition of what it takes to have nexus. The US Supreme Court has been asked to intercede in specific cases this past year and they have declined, stating that it’s up to Congress to make that decision. And Congress has bigger issues then state squabbles that increase the federal government revenue.

So we’re left with a situation that at least when it comes to sales tax nexus information, there are 50 different versions. Or at least it seems like it. For the most part, states require some kind of physical presence inside their state to have nexus. That would mean that there is an office, fulfillment or employees inside that state. But some states are creating new rules.

For example, most states say if you work for a few days or weeks, you don’t have nexus. So, if you fly to Chicago to do a two day seminar, you don’t have nexus. Texas and Hawaii are very aggressive, though, claiming you have nexus if you work just one day in the state.

California is another aggressive state, with new rules stating that if an owner lives in the state, there are any independent contractors in the state or if 25% of all sales or more are made in the state, that California has nexus.

Once you have nexus, you’re responsible for sales tax. Even if you don’t collect the sales tax, the state is going to make you pay it.

The answer, of course, is to collect sales tax even if you have the possibility of nexus being attributed to a state. The problem is that sales tax adds another wrinkle because what’s taxable in one state is not taxable in another.

In fact, there are some crazy rules. For example, if you end up with Illinois nexus and you sell candy to someone who lives in Illinois, you’re going to have to collect sales tax. Or rather, you’ll have to collect it if you candy is subject to sales tax.

Illinois law is a little tricky here. Candy is taxed at a higher rate than food. Some examples of candy are: chocolate bars, yogurt or chocolate covered nuts or fruit, honey coated nuts, caramel popcorn, lollipops, snack mixes containing yogurt of chocolate, breath mints and gum.

But then there are the things you might think are candy that are really food. For example, Illinois says that chocolate covered cookies, yogurt covered pretzels, “candy” that contains flour, plain dried fruits and nuts with no added sweeteners are not candy. They are taxed at the lower food rate.

Don’t assume that you know the state sales tax laws. Every state has their own interpretation. It will take some research every time you have another state that gets added through nexus. Don’t skip doing your due diligence. It could become a very costly mistake.

Author: Diane Kennedy
Article Source: EzineArticles.com
Provided by: Mobile device news