Nexus, nexus, nexus. It’s all that anyone talks about anymore. As you hopefully know by now, the South Dakota v Wayfair Supreme Court decision from 2018 changed the sales tax nexus landscape forever. However, as businesses continue to focus on economic nexus impact from that case, we should not forget that physical nexus still exists.
One of the lesser-known ways a business can create physical nexus is storing their inventory in a state. For example, if you’re using a service like Amazon’s Fulfilled-by-Amazon service. When Amazon stores your inventory in a state, you can have nexus with that state. While you don’t choose where you inventory is stored exactly, Amazon can move your inventory. Amazon’s decision to move your inventory to a state can give you nexus with that state.
However, taxpayers won a rare (and possibly temporary) victory in Pennsylvania. This was through the Commonwealth Court of Pennsylvania, an appellate level court. They recently ruled that a business using that type of service does not have “minimum contacts” within the state to establish nexus.
Should this decision be appealed, a higher court could overturn this decision. Especially since other states have taken the opposite position. It’s not unreasonable to expect this decision to be overturned if it is appealed. But nobody truly knows what the future holds.
Both economic nexus and physical nexus remain at the forefront of not just sales tax, but the entire accounting industry. If you have a sales tax nexus problem, we are the solution!
Saving on An Audit
A construction business was audited by the New York State Department of Taxation & Finance and owed almost $100,000 in tax plus interest.
Determined not to owe on their next audit, the business engaged Sales Tax Defense LLC to help them fix their issues and represent them on their second audit. On the second audit, the business only owed $6,000, which was the result of a mathematical error when the business filed one of their sales tax returns.
The business has a proven process to comply with all sales and use tax laws, and now spends more time and energy operating the day-to-day operations.