A State Nexus Study evaluates the Company’s business activities and connections in each state in order to determine where the Company has a state tax filing requirement for various taxes, including income and franchise, sales and use and gross receipts taxes. The State Nexus Study helps to identify areas of state tax non-compliance and offers a step-by-step process to analyze and remediate non-compliance issues and any related tax exposures.
“Nexus” – The amount and degree of a taxpayer’s business activity that must be present in a state for the taxpayer to become subject to the state’s taxing jurisdiction or taxing power.
Nexus Review – We will review and analyze the business activities conducted in each state and determine whether nexus, and thus a state tax filing requirement, has been established for the tax types selected by Company management to be included in the study.
Sales Tax Taxability (if needed) – To the extent that the Company has established nexus for sales taxes, research must be performed to determine the taxability of the Company’s products and services in each nexus state.
Historical Tax Exposures – For states where nexus has been established and the Company is not filing tax returns, we will estimate the historical tax exposure amounts, including estimated penalties and interest, for the tax types included in the study for a three year look back period (or as needed based on when nexus was established).
Mitigation, Compliance and Registration – For those states where historical tax exposures are identified and quantified in Phases I, II, and III, we will assist the Company with remediating the tax exposures and gaining compliance.
Performing a State Nexus Study every few years is highly recommended in today’s rapidly changing state tax environment. Due to the relatively new and increasingly adopted “economic presence” nexus standards by state legislatures, many businesses have state tax filing requirements in more states than they did only a few years ago. By understanding the business activities from a state nexus standpoint, management teams and owners can more effectively maintain state tax compliance and reduce or eliminate state tax exposures. We look forward to discussing how a State Nexus Study might benefit you and your business.