Nexus is the concept of whether or not a business has enough contact in a state to require them to register with the state taxing authority and pay sales taxes in that state—if a business either has a certain amount of physical representation, personnel, affiliates, or presence at tradeshows in a certain state, they are considered to have nexus there. All states have specific nexus requirements, and California is no exception. Determining whether not a business has nexus in a state requires the help of an experienced accountant to perform a nexus study.
Cook CPA Group is excited to offer state tax nexus services to businesses in the Sacramento area. Having an accountant do a tax nexus study on your business will enable you to ensure that your business is in compliance with all of the state’s sales tax laws.
Understanding State Tax Nexus for Businesses in Sacramento, CA
When businesses figure out whether they have enough business activity in a certain state to require them to pay taxes, it’s known as nexus. It’s important for businesses to determine whether they have nexus in certain states because failing to do so can incur liabilities. If a business has nexus in a certain state, they may be susceptible to exposure if they go for too long without registering with tax authorities and paying state sales taxes. Conversely, businesses may be paying taxes in a state even though they don’t technically have nexus there anymore.
To figure out whether they have nexus in Sacramento, businesses can use the help of an experienced accountant to conduct a nexus study. During a nexus study, an accountant will document a business’s activity within a certain state and will then determine whether or not they have nexus there.
Nexus in Sacramento, California
California state has specific requirements for what businesses can do to have nexus in the state. The first is a physical location. This may be an office or warehouse, or it could be a place of distribution, sample room, storage space, or other place that allows the business to conduct its operations. Businesses that use Amazon to make sales should note that storing items in an Amazon Fulfillment Center is considered to be a physical location, which means that it may have nexus.
A Sacramento business may also be considered to have nexus in the state if enough people that work for the business live in that state. This may mean salespersons, contractors, or personnel that sell, deliver, install, or assemble any piece of tangible personal property.
Another way that business can know if they have nexus in Sacramento is if they have affiliate nexus, which is also known as “click-through” nexus. This type of nexus refers to business that are affiliates to other businesses by making referrals. The affiliates will either directly or indirectly refer potential customers of tangible personal property to web pages by using digital methods. The affiliate must register with tax authorities and pay taxes when the affiliates make sales that exceed $10,000 and their total sales are more than $1 million in the preceding 12 months.
Presence at tradeshows in Sacramento is another way that businesses can have nexus in California. If the business makes sales at a trade show, they must collect use taxes from buyers; however, if they have had a physical presence at trade shows for less than 15 days within one calendar year, nexus is not established.
Nexus can also be determined in the amount of combined sales that a business makes within Sacramento. If a business’s combined sales of tangible personal property in Sacramento exceeds $500,000 within the preceding calendar year, they will be considered a retailer engaged in business, which means that they have nexus. The threshold of sales of tangible personal property used to be $100,000 but was raised only a few years ago.
It should be noted that whether or not a business has nexus in a state depends on what they sell. Services in Sacramento, CA are not subject to sales taxes, unless the service entails creating or manufacturing a product. Therefore, businesses that sell services do not have to worry about whether they have nexus in California. Almost all businesses that sell tangible personal products are subject to sales tax, which means that they should make efforts to figure out whether they have nexus in California.
If your Sacramento, CA business has nexus in California, you will first have to register for a sales tax permit. You can register for a permit by visiting the website of the California Department of Tax and Fee Administration and providing information about yourself and your business. It is free to apply for a permit but some businesses may be required to pay a security deposit if they have too many unpaid taxes. Once a business has registered for their sales tax permit, they should get in touch with an accountant to make sure that they are compliant with the state’s sales tax laws.
Accountants and CPAs Available for State Tax Nexus Studies in Sacramento
If your business needs help figuring out whether you have nexus in Sacramento, CA, you should speak with a knowledgeable and experienced state tax nexus study accountant from Sacramento’s Cook CPA Group. The accounting team that works with Cook CPA Group can bring decades of experience to all of their clients’ tax preparation issues.