Why Your Business May Have to Pay Nexus Tax

If you are concerned that your business may qualify as a nexus in one or more states, continue reading to discover whether or not your business is likely to be legally defined as a nexus and why your business may be mandated to pay nexus tax. Especially if you’re relatively unfamiliar with the relatively new concept of an economic tax nexus. Or if you’ve recently established a new business and want to ensure that you abide by nexus state laws, it’s also well worth reading the important information which is listed below.

Why your business may have to pay nexus tax:

States are looking to increase their annual revenue:

The number one reason why states have decided to target out of state businesses for sales tax is that by defining out of state businesses as having significant business interest in their state, they are able to classify such businesses as nexuses and are able to bring in millions or even billions of dollars in additional revenue. As the leaders of states realized that they were missing out on huge sums of money each year, by failing to target out-of-state businesses who target their customers as a target audience. As an example, California has had strict sales tax nexus laws since 2019.

The first state to introduce nexus legislation and its legacy:

South Dakota was the very first US state to introduce laws to ensure that out-of-state businesses who had a significant economic interest in the state would be forced to pay sales taxes. As you can probably imagine, business owners across the country weren’t too thrilled with South Dakota’s decision and took their case to the Supreme Court. Unfortunately for business owners, the court decided to uphold South Dakota’s decision and effectively enforced the state’s new laws. Due to South Dakota’s success at the Supreme Court, a precedent was set and quickly the vast majority of US states followed suit and instigated their very own sales tax nexus laws.

Are international businesses required to register as nexuses in the US:

If you are curious about whether or not global businesses are required to register as nexuses in US states that they meet the regulations for, the simple answer is yes, they are legally obligated to register as nexuses in the states for which they qualify as a nexus. International businesses who plan on selling their goods and or services to the US market should definitely look into whether there are certain states in which they may need to register as a state nexus in.

So if you were curious about the history behind how state nexuses were created in the US and why they were created as well as the implications which being registered as a nexus may have for your business, hopefully, you found the information listed above informative. For more information on how to meet your obligations as a sales tax nexus and to avoid getting into legal trouble over skirting sales tax nexus laws, simply continue reading.