Want my blog posts delivered to your inbox? Click here to subscribe
To listen to the podcast version of memo click here —> Podcast Version
A company’s home state is usually where they are incorporated and physically work. All other states are “foreign” states.
Understanding nexus is vital to understanding this memo, so let me explain what nexus means for tax and business purposes.
When a business physically transacts business in a “foreign” state, they have nexus there and are subject to taxation there such as corporate and personal income tax, payroll tax and possibly sales tax. You always have nexus in your home state where you work and are incorporated.
- Examples of transacting business in a “foreign” state:
- Your main office is in NJ, but some of your employees or subcontractors are working from their home in VA. You have nexus in VA and are subject to VA taxation.
- Your main office is in CO, but your employees physically fly to CA to sell to or service customers. You have nexus in CA and are subject to CA taxation.
- Your main office is in TX, but you manufacture your product in a facility you own in TN. You have nexus in TN and are subject to TN taxation.
If your business is found to have nexus in a foreign state this means that you will have to apportion and allocate your income between your home state and that foreign state. You will have to file income tax returns in that foreign state. You will also have to file payroll tax returns for the employees working there.
States are very militant about this as it means “finding” and taking income tax from other states. So don’t be surprised if “foreign” states contact you if they find out you are involved in one of the examples above.
These nexus rules are very strict and you should check immediately with your CPA about potential liabilities you weren’t aware of until this moment.
I predict that many companies will maintain liberal “work from home” virtual options for their employees after the lockdown. One of the main things this allows businesses to do is to hire people from out of state as physical proximity will no longer matter.
This is fantastic as the talent pool for new hires becomes immense and not just restricted to those living within commuting distance to an office.
But negatively, this will also increase these nexus issues and force many companies to file income, payroll and sales tax returns in states they never had to before.
A warning for employees. The state where you are physically working can rightfully demand that you also pay taxes to that state which means your having to file a personal income tax return there.
Questions? Concerns? Call me on (732) 673-0510.
Want my blog posts delivered to your inbox? Click here to subscribe
Click here to request a consultation or ask me a question.
Please reach out to me without hesitation with any tax, business or accounting question, and to schedule a consultation.
Tax Laws are complex.
It is very easy to make mistakes that can incur penalties.
Do you have a Tax, Accounting or Business Question?
Call Me Immediately. (732) 673-0510.
Is your CPA or Attorney
ignoring your Phone Calls and Emails?
Call Me Immediately. (732) 673-0510.
Remember,
“If We Aren’t Working For You, Then You Aren’t Working At Your Best”
Chris Whalen, CPA
(732) 673-0510
81 Oak Hill Road
Red Bank, NJ 07701
www.chriswhalencpa.com
#Lockdown #workingonline #workfromhome #remotework #telecommuting #workingremotely #workfromhome #nexus #SmallBusinessSaturday #smallbusinessowner #Covid2019 #CoronavirusLockdown #CoronavirusPandemic #COVIDー19 #StimulusChecks #Covid19 #Coronavirus #smallbusinessowners #UnEmploymentClaims #PUA #unemploymentbenefits #unemployment #incometaxes #incometax #irs #businessmarketing #businessowner #yearend #jerseyshore #cpa #taxplanning #Accounting #TedTalk
