Nexus is a “link” or “connection.” The relation between an individual or entity and a taxing jurisdiction that is appropriate for that jurisdiction to compel that person or entity to comply with its sales and use tax laws is referred to as sales and use tax nexus. Quill Corp. vs. North Dakota [May 26, 1992] and National Bellas Hess, Inc. vs. Department of Revenue of the State of Illinois [May 8, 1967] provide the current basis for deciding when sales and use tax nexus occurs. Do you want to learn more? Visit Tax Shark .
The Supreme Court ruled in favour of the taxpayer in both Quill Corp. and National Bellas Hess, Inc., restricting the states’ right to impose their taxing power over interstate commerce. The lessons learned from these two cases can be adapted to today’s markets to assist with sales and usage tax enforcement. Although most states continue to refer to these cases when deciding sales tax nexus thresholds, they continue to seek sales and use tax authority extension. Given the value of nexus in deciding whether or not a business has sales tax nexus, it’s worth remembering some of the obstacles in determining whether or not a company has sales tax nexus. As with most sales and use tax issues, deciding whether or not a company has sales tax nexus necessitates some degree of understanding of a state’s law as it relates to the company’s operations. With that context in mind, here are the most common sales tax nexus problems that technology companies face. It’s also worth noting that sales tax isn’t necessarily “paid” by sellers. Sellers, on the other hand, “collect and remit” sales tax. This may be crucial. For example, sales tax is often “due” in the case of internet sales. The question is whether the seller is liable for collecting and remitting the tax or whether the buyer is responsible for self-reporting. Our buying preferences have changed as a result of the internet, and sales tax collections have decreased.