TaxConnex, America’s leading independent sales tax outsourcing and consulting firm, today released the latest addition to its series of white papers on sales and use tax issues affecting technology companies. The latest, entitled “Top Five Activities that Cause Sales Tax Nexus for Technology Companies” was authored by Jeff Meigs, Partner and leader of TaxConnex’s Technology Consulting Practice.
“Sales and use tax is often left unaddressed by technology companies”, says Meigs, “which leads to uncollected sales taxes, interest and penalties. These hidden liabilities are preventable for the most part and tend to pop up at the most inopportune times such as during the due diligence associated with a merger or acquisition.”
“Much of the confusion stems from a misunderstanding of sales tax nexus creating activities” added Meigs. "Establishing a presence in a state, even temporarily, may create nexus, giving the technology company the duty to collect and remit sales tax. Affiliate relationships, sales calls, trade shows and even on-site support visits can create sales tax nexus. Having sales tax nexus will open up every transaction to potential tax liability, including otherwise non-taxable internet transactions. A company really needs to know the consequences of its activities in relation to creating sales tax nexus so they can make informed decisions. Otherwise, they may be creating sales tax nexus and generating unfunded tax liabilities that will cause problems later.”
In this white paper, TaxConnex identifies five common issues that technology companies encounter that can inadvertently lead to hidden sales tax liabilities by creating nexus. If you are uncertain whether your company may have established nexus or if you need assistance planning for potential nexus creating activities, call TaxConnex.