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Exceeding Expectations. Always. — Business Advisors and CPAs

Tax Nexus Questionnaires

State tax authorities are taking advantage of advances in technology to identify and audit businesses and individuals that have earned revenue in their state and tacking on large penalties for those who have not complied with their filing requirements. In the past year, we have seen numerous requests for Federal ID numbers from states that intend to create a database of contractors and businesses working in their state. The Multistate Tax Commission and the Streamlined Sales Tax Governing Board are coalitions of states formed in part for the purpose of helping one another identify potential taxpayers.  In addition, many states and local governments are hiring private auditing firms to locate individuals and businesses that should be filing in their state. The result is that states are claiming and collecting taxes that they have never before been able to collect.

States aren’t limiting their interests to income taxes and sales taxes. Rather, franchise taxes, commercial activity taxes, and business and occupation taxes are taxes of interest to the States and are designed to catch those taxpayers that fall through the income and sales tax cracks. The penalties for failing to file can be onerous. States can lien your property and force your customers to withhold payment from you until you comply with filing requirements. They do not accept ignorance of the law as an excuse.  Those who have done work for government entities located in other states are already aware of this and have been subject to withheld payments for several years now.

In light of this, we recommend a review of your state filing requirements for 2013 so that we can inform you of your requirements. We have devised a checklist for you to complete.  Although sections of the checklist may not apply to you, we ask that you answer or strike through every question as appropriate. At best, this could save a lot of unnecessary punitive costs.  At the least, it will give you peace of mind and perhaps educate you for future decisions regarding out of state business.   The cost associated with this study will be relative to the time required to complete it after receiving your completed checklist.

 

Income Tax Nexus Questionnaire
Sales and Use Tax Nexus Questionnaire