Sales Tax Nexus – Do Not Ignore

Are you suffering from Nexus Perplexus?

Definition: A state of confusion regarding the degree of business activity allowed before a state may exert its jurisdiction to impose a tax.

Cause: The many (and often conflicting) definitions of Nexus for state tax purposes from legislative, judicial, administrative, and secondary sources.

Symptoms:

  • A nagging feeling that there are potential tax liabilities in other states.
  • A suspicion that state taxes may be lowered as a result of apportionment of business income to other states.
  • A cold sweat resulting from the receipt of a nexus questionnaire from a state where one is not currently filing.

Are your products and services taxable in your home state? How about other states where you sell? Did you know that if you charge a fee for electronically filing an income tax return in Texas that the fee is subject to sales tax?

Regardless of the sophistication of the sales tax reporting system, the system still needs to be told what is taxable and what is not.

As businesses expand into multiple states (“multi-state”), the issue arises of whether the “foreign” states can force your company to register and collect use tax. Your company’s presence in a different part of a country or state is referred to as a “nexus”.  This may be through your salespersons traveling to those states, or your hiring of jobbers, repairpersons, or independent contractors who perform installation or maintenance in a state where the company is not registered may create nexus in that state.

The level of activity performed has a direct bearing on whether another state has the ability to impose a tax.  The critical issue is to determine if the nexus exists.  A nexus review will carefully determine the facts of a taxpayer in light of not just state rules and regulations, but all applicable federal legislation, as well as relevant judicial and administrative law.  The end result is a clear picture of potential state tax exposure.

Sales Tax Nexus issues can create serious tax liabilities because companies miss the opportunity to collect tax from customers and eliminate their own burden. In addition, there is usually no statute of limitation because the company never filed a return in the state where it created nexus.

Have you received a nexus questionnaire lately? If not responded to correctly, a state may conclude that nexus exists and assess tax, penalty, and interest for all periods from the first-day nexus exists. There have been many cases where taxpayers have filed returns and paid tax to a state where nexus did not exists, based simply on a nexus questionnaire that was not properly responded to.

The sales tax nexus requirements are very different from income taxes. In simple words, activities that will not cause nexus (a filing requirement) for income taxes will cause nexus for sales tax filing purposes. Companies typically delegate the sales tax filing function to clerk level positions. Consequently, high turnover in these positions can create inconsistency in the sales/use tax reporting function.

It is often difficult to find the time and the resources to prepare a comprehensive state tax plan. Outsourcing the planning function to a state tax expert can be a cost-effective way to ensure that all state tax options are being considered. A state tax plan starts with a review of the taxpayer’s facts and circumstances, as well as future plans and expectations. The end result is a recommendation of the best planning technique(s) for lowering state tax liabilities and/or exposure.

 

Credit Score Factors – The essentials

Do you know your credit score but are wondering what it means? We’re here to help you understand it. The data pulled from all of your financial histories is placed into five primary categories that make up your FICO score. These five factors are as follows: payment history, amounts owed, length of credit history, new credit, and types of credit used. Represented by the pie chart below, each factor is weighed differently – some are weighed more and some are weighed less. To find out which areas of your personal finances should be given more attention, review the easy-to-use chart below, and then read out tips for raising your score through these five factors.What affects your credit score

What Makes Up a Credit Score?

Payment History

As the most weighed factor of your credit score, your payment history is a very important factor in determining your chances of qualifying for loans and mortgages. We all know that there is no way of going back and changing your past, but there are indeed ways of erasing your past mistakes. With 35% of your credit score is calculated from your payment history, it is important to make sure that you avoid missed payments and late payments. Contact our credit team to find out how you can get your bad items removed from your payment history.

Amount Owed

The next largest factor that determines your credit score is the amount that you owe to your creditors. This is calculated by the amount that you owe on all of your accounts, and how much credit is available to you on your revolving accounts. To easily determine where you stand in regard to the amount owed, you can calculate your credit-to-debt ratio. In this, you simply must divide the amount of debt on your credit card by the limit amount on your card, and then multiply by 100. For example, if you have $2,000 in debt on the card and the limit is $10,000, then your credit-to-debt ratio is 20%. Anything below 50% is an acceptable ratio.

Length of Credit History

The third factor of your credit score is particularly pertinent to young people. This number is calculated by how long your cards have been open. Basically, the longer your accounts are open, the better. In calculating your length of credit history, FICO takes the following factors into account: how long your collective credit accounts have been established, how long each credit account has been established, and how long it has been since you used each card. The best advice regarding your length of credit history is to keep all of your cards open for as long as possible.

New Credit

Making up 10% of the weight of your credit score, having new credit is an easy way to boost your score. If you have a steady source of income, then consider opening one or two new cards for charging small items. The credit reporting agencies will, however, penalize you for overdoing it and opening too many cards in a short period of time. In order to effectively build your credit by opening new credit cards, it is important to do so in moderation.

Types of Credit Used

Finally, the last factor of your credit score is the types of credit that you use. The types of credit considered in your FICO score are as follows: credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans. It is important to have a good mix of all of these different types of credit in order to boost your credit score. Diversity in your credit cards and accounts is essential to building a good credit score.