As a business owner, it’s important to stay up-to-date on the latest laws and regulations. One area you may be wondering about is economic nexus laws.
These are laws that state how much sales revenue your business must generate in order to be required to collect sales tax from customers in a given state. In this blog post, we will discuss what economic nexus laws are and how to ensure your business is compliant with them!
1. What is an economic nexus law, and what states have them in place currently?
An economic nexus law is a law that states how much sales revenue your business must generate in order to be required to collect sales tax from customers in a given state. Currently, there are over 44 states with economic nexus laws in place.
For more information on specific states’ laws, you can visit the Federation of Tax Administrators website.
If your business generates sales revenue in a state where there is an economic nexus law in place, you must register with the state’s tax authority and begin collecting sales tax from customers. Failing to do so may result in penalties and fines.
2. What are the implications for businesses that are not compliant with economic nexus laws?
If you don’t register with the state’s sales tax authority, your business can be fined by that state for not collecting sales tax from customers.
Also, if you’re found to have willfully avoided registering and collecting sales taxes in a given state where there is an economic nexus law in place, then you could face criminal charges which carry penalties such as imprisonment.
You can register with sales tax authorities in each state where you sell products or services by contacting their departments of taxation (or equivalent). They’ll send the paperwork that needs to be completed and sent back; then, they’ll approve your business registration within a few weeks.
Once your sales tax registration is approved, you must collect sales taxes from customers in that state. If you’re planning on expanding into other states soon after registering for sales tax purposes there too, it will be worth considering how much time and effort this would take up as well as the cost of doing business with them before making a final decision about whether or not it’s worth expanding into another state.
Every sales tax registration has different requirements, so you should contact your state tax authority directly for more information on how to register with them.
3. How can businesses ensure they are compliant with these laws?
There are a few things businesses can do to ensure compliance with economic nexus laws:
- Register for sales tax authority in all states where your business has sales revenue above the threshold amount.
- Keep track of sales generated in each state. This can be done by using sales tracking software or a spreadsheet.
- Collect sales tax from customers in states where you have an economic nexus law in place. You can either do this yourself or use a third-party service to help you with sales tax support.
By following these simple steps, businesses can ensure they are compliant with current economic nexus laws.
4. What is the future of economic nexus laws, and how might they change over time?
It’s difficult to say exactly how economic nexus laws will change in the future. However, more states will likely adopt these laws as they become increasingly popular. It’s also possible that the threshold amount for sales revenue required to be considered taxable in a given state may increase over time.
The business world is changing at a rapid pace, and it’s important for companies to stay on top of the latest regulations. Keeping yourself up-to-date with economic laws can help avoid penalties or fines when you’re inspected by tax inspectors!