Aggressive State Taxes

83b3e00feb9984554e61_Kenneth_Bagner_Final_967.jpg
83b3e00feb9984554e61_Kenneth_Bagner_Final_967.jpg

Whenever states experience a dip in their revenue, they often shift into a “generate cash” mode to help them replenish their depleting funds and survive the financial challenge. No state leaders want to face empty coffers, so they have to seek alternative methods for refilling them.

What this means for business owners however is that as the states become more aggressive one tried and true solution has been to seek ways of collecting additional income tax revenue from corporations that are doing business in the state.  But under certain circumstances this can search for tax funds can extend to companies that do not even maintain a physical presence there!

This is where the concept of nexus comes in. Nexus means ‘having a connection’ – and in tax law it is a term used to describe a situation in which a business has a “nexus” or “connection” or “presence” in a state and as a result is subject to state income taxes and to sales taxes for sales within that state.

Sign Up for E-News

The states pursue this line of taxation because they want to be sure that if a company is making sales (generating income) in their state, or conducting some business in their state, they are at the same time paying their fair share of taxes on that income.  They refer to nexus to describe the amount and degree of business activity that must take place in order for a state to actually be able to tax an entity’s income.

This scenario can be complicated as the revenue hungry states extend, and even potentially overreach, their definition of the out-of-state company’s tax responsibilities. Whether the taxpayer needs a physical presence or just an economic presence, this process can create a confrontational atmosphere, leading to confusion or worse. With internet sales growing and companies establishing a regional and even national footprint, this problem is only going to become worse and the waters more muddied over time. To reinforce the challenge, we only need to look at the 2015 statistic for U.S. mobile commerce sales which totaled about $104 billion, up 38.7% from $75.03 billion in 2014.  And the interesting fact is that this statistic does not capture all internet sales (those made without a brick or mortar facility in the state!) – but rather it is just a reflection of sales conducted on mobile devices – not through other online services.

The confusion that can result is one of the most challenging concerns facing companies today because decision makers need to be able to anticipate the taxes they will owe and budget appropriately.

If you are conducting business across state lines, talk over your own situation with your tax consultant or call Ken Bagner at 973-994-9494.

This column will provide business advice and new  perspectives on business news, emerging trends and traditional topics impacting individuals, family businesses and professional service providers across the tri-state area.

The opinions expressed herein are the writer's alone, and do not reflect the opinions of TAPinto.net or anyone who works for TAPinto.net. TAPinto.net is not responsible for the accuracy of any of the information supplied by the writer.

TAP Into Another Town's News:

You May Also Be Interested In

Sign Up for E-News

Livingston

Essex County Freeholders Celebrate African-American History Month

February 22, 2018

NEWARK, NJ – At its 2018 African-American History Month Celebration on Wednesday at the Hall of Records in Newark, the Essex County Board of Chosen Freeholders commemorated the heritage, culture, resilience, and spirit of the African-American community.

Brendan Gill, board president and Freeholder At-Large, first acknowledged African-American contributions, both past and present, in ...

How Do I Decide Which College to Attend?

Now that college acceptances are rolling in, how do I decide which to attend?

Your hard work in high school has paid off. You took your SAT/ACT exams, got the best grades you could, and filled out as many applications as you needed to. Acceptance letters are starting to come in and you need to make a decision on where you will go in the fall. It's hard to decide!! Here are some tips and ...

Shouts of Racial Slurs During "Black Panther" Bring Police to Sparta Theatre

February 21, 2018

SPARTA, NJ – Sparta police were called to the New Vision Sparta Theater on Sunday night because of a woman shouting slurs in a screening of Black Panther.

Former New Jersey Assembly candidate Michael Grace was in the theater when two people started yelling racial slurs including “look at these ‘n-word’” and “can you believe these ...

Upcoming Events

Carousel_image_b9dfd7fd9ec06f34f8cd_coriphoto

Sat, February 24, 4:00 PM

Lobby - Office Building, Livingston

Gun Violence Prevention & Congressional Candidates

Other

Carousel_image_198d9d8e60fbe2b63cf4_be01635f448f7ee17d10_flyred_photo1

Sun, February 25, 1:00 PM

CycleBar, Livingston

Cycle Red for Heart Disease to Benefit Heart ...

Giving Back

Mon, February 26, 1:30 PM

Livingston Public Library, Livingston

Monday at the Movies: WILD OATS

Arts & Entertainment

NJ Acting Health Commissioner Cites Inglemoor as Example of Best Practices in Flu Prevention

February 22, 2018

LIVINGSTON, NJ — With one of the worst flu seasons in recent history taking a daily toll across the nation, New Jersey Acting Health Commissioner Dr. Shereef Elnahal visited Inglemoor Rehabilitation and Care Center this week to meet residents and praise clinical staff for their success at keeping the flu at bay.

"There are best practices that Inglemoor has already implemented ...

Let the Games Begin

I am truly awed by the Olympics.  Watching these superb young athletes on TV inspires me to renew my membership to the gym and pursue my lifelong dream of taking home the gold.  

 

The problem is that in my deluded head, I can see actually see myself standing atop the podium.  I am wrapped in a puffy designer ski coat with a huge piece of bling slung around my neck ...